Global investment giant Vanguard has divested its entire holdings in Japanese government bonds, signaling growing concern over fiscal instability following Prime Minister Sanae Takaichi's announcement of an early election and a temporary food sales tax cut. The move comes amid rising expectations of a significant selloff in JGBs.
- Vanguard has fully divested from Japanese government bonds (JGBs)
- Prime Minister Sanae Takaichi announced an early election for February 2026
- A temporary food sales tax cut was pledged to voters if her coalition wins
- Japanese government debt exceeds 260% of GDP
- 10-year JGB yields rose 1.7% in January 2026
- Vanguard’s prior JGB exposure estimated at ~$15 billion
Vanguard, one of the world’s largest asset managers with over $10 trillion in assets under management, has fully exited its positions in Japanese government bonds (JGBs), according to regulatory filings and internal disclosures. This strategic retreat precedes an upcoming general election scheduled for February 2026 and follows Prime Minister Sanae Takaichi’s public commitment to lower the food sales tax temporarily if her coalition secures a new mandate. The decision reflects heightened scrutiny over Japan’s long-term fiscal sustainability. With government debt exceeding 260% of GDP—among the highest globally—the prospect of additional short-term stimulus measures has raised concerns about future bond issuance and potential inflationary pressures. Vanguard’s exit underscores investor caution ahead of what market analysts are calling a 'fiscal policy inflection point.' Although exact figures for Vanguard’s JGB exposure were not disclosed, the firm’s previous stake represented approximately 1.8% of its global fixed-income portfolio, equivalent to roughly $15 billion in value based on recent benchmark allocations. The timing of the divestment coincides with a 1.7% rise in 10-year JGB yields since mid-January 2026, indicating market anticipations of increased supply and reduced central bank support. This shift is likely to amplify volatility across Asian fixed-income markets, affecting institutional investors and pension funds with similar exposures. Japanese financial institutions, including major banks such as Mitsubishi UFJ Financial Group and Sumitomo Mitsui Banking Corporation, may face higher funding costs as confidence in sovereign debt weakens. Meanwhile, the Bank of Japan is under increasing pressure to clarify its stance on yield curve control, which could influence the trajectory of the yen and broader capital flows.