Takaichi’s Tax-Cut Election Pitch Is Spurring a Bond Meltdown

It’s been a day of markets reacting badly to the news. The slump in Japanese bonds deepened Tuesday, sending yields soaring to records as investors gave a thumbs down to Prime Minister Sanae Takaichi’s election pitch to cut taxes on food.

The 40-year rate hit 4%, the highest since its debut in 2007 and a first for any maturity of the nation’s sovereign debt in more than three decades. The yield on 30-year and 40-year bonds climbed more than 25 basis points. A lackluster auction of the 20-year tenor earlier underscored broader worries over government spending and inflation. Japan’s chief government spokesperson played down the sudden meltdown, saying “long-term yields move on various factors and are determined in the market so I’ll refrain from commenting on every move, but we’re keeping a close eye on markets.”