Japanese government bond yields have surged to levels not seen in over a decade, triggering concerns among global investors about the stability of Japan's long-embedded monetary policy. The spike reflects growing anxiety over potential shifts in fiscal and monetary strategy.
- 10-year JGB yields surpassed 1.8% in January 2026, up 75 basis points from 2025
- Japan’s national debt exceeds 260% of GDP
- Annual JGB issuance expected to reach ¥140 trillion ($930 billion) in FY2026
- Foreign investor net long positions in JGBs declined over 50% since mid-2025
- Bid-ask spreads in core JGBs have widened significantly
- Next BOJ policy meeting scheduled for February 11, 2026
Japan’s sovereign debt market has entered uncharted territory as 10-year JGB (Japanese Government Bond) yields climbed past 1.8% in early January 2026—marking a 75-basis-point increase from the previous year. This rise coincides with a narrowing of the Bank of Japan’s yield curve control (YCC) band, which had previously capped long-term rates at 1.0%. The breach of this informal ceiling has intensified speculation that the central bank may be forced to reconsider its ultra-loose stance. The surge in yields is driven by mounting fiscal pressures: Japan’s national debt now exceeds 260% of GDP, with annual issuance projected to surpass ¥140 trillion ($930 billion) in FY2026. As domestic demand for bonds weakens amid declining household savings and rising inflation expectations, foreign institutional investors have begun scaling back holdings, reducing their net long positions in JGBs by over 50% since mid-2025. This shift has triggered a liquidity crunch in the core government bond market, with bid-ask spreads widening and trading volumes dropping. Credit rating agencies are reviewing Japan’s sovereign outlook, while benchmark index providers have flagged potential downgrades if yield volatility persists beyond six months. The impact extends beyond fixed income, affecting equity valuations in export-oriented sectors where currency sensitivity has increased. Market participants now await the BOJ’s next policy meeting on February 11, 2026, where any signal of YCC relaxation or rate tightening could trigger further repricing across Asia’s financial markets.