Japanese long-term bonds were sold off as markets worried that the scale of economic stimulus would boost bond issuance.

Japanese long-term government bonds fell sharply on Monday as renewed concerns about the fiscal situation intensified ahead of the government's expected announcement of its first economic stimulus package as early as this week. The decline in Japanese bonds echoed the fall in US and UK bond markets over the weekend. The yield on 20-year Japanese government bonds rose to its highest level since 1999; the 30-year yield rose 5 basis points to 3.26%, and the 40-year yield climbed 5.5 basis points to 3.6%. Traders are focused on the actual scale of fiscal spending in Prime Minister Sanae Takaichi's economic plan, fearing that higher debt issuance could threaten the stability of Japanese markets. Monday's GDP data supported Takaichi's stance on pushing for a large-scale stimulus package, although the Bank of Japan still expects to raise interest rates in the coming months. Daiwa Securities stated, "Concerns about a large-scale stimulus package are keeping investors cautious, and the impact on government bond issuance remains unclear, putting selling pressure on long-term bonds." (Jinshi)