Japan’s bond yields ease after government approves $135 billion stimulus package

Friday 21 November 2025 - 17:50

By: Dakir Madiha

Japan’s bond yields ease after government approves $135 billion stimulus package

Japanese government bond yields retreated from their highest marks in 17 years following the approval of a substantial 21.3 trillion yen ($135 billion) economic stimulus package by Prime Minister Sanae Takaichi's cabinet. The stimulus aims to support economic growth and ease inflationary pressures, particularly the rising cost of living for households. The benchmark 10-year Japanese government bond (JGB) yield declined from a peak of 1.835% to 1.785%, while longer-term yields, including the 30- and 40-year benchmarks, also pulled back from unprecedented levels reached earlier in the week.

The stimulus, the largest since the pandemic era, includes generous subsidies for energy costs, gasoline tax cuts, and investments in crucial sectors such as shipbuilding and artificial intelligence. Despite initial concerns about the package worsening Japan’s already large public debt, analysts suggest the fiscal impact may be manageable due to stronger economic growth expectations and recycled fund sources. The government projects that the package will boost annual GDP growth by 1.4% over three years.

Meanwhile, the Japanese yen weakened to around 157 per dollar, prompting caution about possible currency intervention. Bank of Japan Governor Kazuo Ueda indicated the central bank will deliberate on the timing and feasibility of interest rate hikes to manage inflation risks associated with the weaker yen. The BOJ’s stance, alongside the government’s expansive fiscal actions, will be closely watched by investors navigating rising yields and currency volatility. The evolving policy mix highlights Japan’s delicate balancing act between supporting growth, controlling inflation, and maintaining fiscal discipline.

This development is particularly relevant for investors and policy analysts tracking Japan’s economic landscape amid global inflationary pressures and a shifting monetary policy environment.