Japan’s 10-year government bond yield rose above 1.6% on Thursday, reaching its highest level in nearly 17 years amid mounting political uncertainty and weak demand at a recent bond auction. A sale of 40-year Japanese government bonds earlier this week drew the lowest demand since 2011, reflecting investor caution. Speculation over Prime Minister Shigeru Ishiba’s potential resignation intensified after the ruling coalition lost its upper house majority in weekend elections. Although Ishiba denied the reports, saying he had “never discussed” stepping down, political instability continues to weigh on market sentiment. At the same time, demand for safe-haven bonds softened as global risk appetite improved. Japan recently reached a trade deal with the US that includes a 15% tariff on its exports and a pledge to invest $550 billion into the US economy. Broader optimism was also fueled by reported progress in US-EU trade negotiations.
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