Political timing and fiscal rhetoric collided with market structure in early February, prompting DWS’s CIO team to assess whether Japan has entered a new and less predictable financial phase.
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Expansionary fiscal signals ahead of the snap election drove record spikes in ultra-long JGB yields, exposing a structural demand gap rather than a liquidity crisis.
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Market stability is supported by domestic ownership and the Bank of Japan’s balance sheet, but volatility in bonds and the yen is likely to persist.
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Japan’s debt remains sustainable for now, yet increasingly dependent on inflation staying near target and funding costs staying low.
Is Japan normalising—or losing its role as a global anchor? The full report explores the implications for rates, currency, and global spillovers.
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