Japan's Bond Yields Rise Amid Election and Consumption Tax Cut Concerns

Japanese government bond yields surged to multi-decade highs following Prime Minister Sanae Takaichi's announcement of a snap election on February 8 and her pledge to suspend the consumption tax on food and beverages for two years. This proposed tax cut, alongside potential increased defense spending, has raised market concerns about Japan's fiscal sustainability and government debt. The surge in yields coincided with weak demand at a 20-year bond auction, while Tokyo stocks and the yen declined amid investor caution over fiscal and political uncertainty.