Japan’s 10-year government bond yield slipped to around 1.78% on Friday, down from a 17-high of 1.84% in the previous session, as investors braced for the announcement of a massive stimulus package from Prime Minister Sanae Takaichi’s government, expected to exceed 20 trillion yen. Lawmakers from the ruling Liberal Democratic Party have even proposed a supplementary budget exceeding 25 trillion yen to fund the plan, well above last year’s 13.9 trillion yen extra budget. The large spending proposal has stoked concerns over Japan’s fiscal health, fueling a ‘Sell Japan’ trend that weighed on the yen and domestic bonds. On the data front, Japan’s core inflation rose to a three-month high in October, while exports exceeded expectations. Accelerating inflation gives the Bank of Japan more impetus to raise interest rates.
