Particle.news
Download on the App Store
4 ARTICLES
·
last wk.

Japan’s Upper-House Election Raises Deficit Outlook While Yields Remain Contained

Foreign inflows, BOJ support, abundant domestic savings, inflation’s return keep long-term yields near 3% despite looming tax cuts and wider deficits.

Japan's Prime Minister Shigeru Ishiba attends a press conference at the headquarters of the Liberal Democratic Party (LDP) in Tokyo on July 21, 2025, the day after the prime minister's coalition lost its upper house majority. PHILIP FONG/Pool via REUTERS
Image
Image

Overview

  • The July 20 upper-house election undermined Prime Minister Shigeru Ishiba’s coalition and increased the likelihood of tax cuts and larger fiscal deficits.
  • Thirty-year JGB yields have climbed but remain near 3%, a level low by historical standards given Japan’s debt burden.
  • The Bank of Japan’s yield curve control framework and near-zero short-term rates continue to anchor bond market stability.
  • A weak yen and Japan’s return to sustained inflation bolster investor demand alongside massive domestic savings.
  • Foreign investors have poured over ¥15 trillion into Japanese bonds this year to capture attractive swap-adjusted returns.