Japan’s 10-year government bond yield climbed above 1.75%, nearing levels last seen in 2007, as investors weighed the impact of potential large-scale fiscal stimulus under Prime Minister Sanae Takaichi. Her first stimulus package could reach 17 trillion yen or more, exceeding last year’s 13.9 trillion yen, raising concerns about Japan’s already high public debt. Additionally, recent data showed the nation’s economy shrank 1.8% in Q3. Although smaller than expected, this marked the first contraction in six quarters, driven by falling exports amid US tariffs and reinforcing expectations of increased government spending to support growth. Markets also speculated the BOJ may delay rate hikes as Takaichi is expected to advocate caution while advancing a larger-than-expected fiscal package. Her upcoming meeting with BOJ Governor Kazuo Ueda is being closely watched for signals on the central bank’s policy path and how authorities intend to manage fiscal expansion and currency pressures.
