Japan's super-long bonds rise as fiscal concerns ease
By Junko Fujita
TOKYO, July 18 (Reuters) - Japanese government bonds rose on Friday as concerns over potential deterioration of fiscal health receded ahead of a closely watched national election.
The 40-year JGB yield JP40YTN=JBTC fell as much as 8 basis points (bps) to 3.295%, and was last at 3.35%.
The 30-year JGB yield JP30YTN=JBTC fell 6 bps to 3.03%, before moving slightly higher at 3.065%.
Yields move inversely to prices.
"Those bonds were sold too heavily this week," said Takeshi Ishida, a strategist at Kansai Mirai Bank.
Japanese government bonds with super-long maturities were sold heavily this week amid concerns about the nation's fiscal health ahead of the upper house election.
Prime Minister Shigeru Ishiba's Liberal Democratic Party (LDP) and its partner Komeito are forecast to lose their majority at the election on Sunday.
The market feared that a potential defeat could empower opposition parties, which are seeking to cut or abolish the sales tax, leading to expansion of spending.
"These concerns have been eased by now. Even as Japan ends up cutting consumption tax, the scale of the cut will be limited so that the fiscal condition will not be heavily worsening," said Ishida.
The 20-year JGB yield JP20YTN=JBTC fell 4.5 bps to 2.525% and the 10-year JGB yield JP10YTN=JBTC fell 3.5 bps to 1.52%.
The yield curve will steepen next week if the LDP-led coalition loses a majority, Ishida said.
If Japan reaches an agreement with the United States on trade talks to avert a 25% tariff on the weekend, the Bank of Japan will be under pressure to raise interest rates, which would push up the yields on shorter-dated bonds, he added.
Later in the day, Ishiba will meet U.S. Treasury Secretary Scott Bessent in Tokyo, who is visiting Japan to attend the U.S. national day at the World Expo 2025 in Osaka on Saturday.
Japan's top trade negotiator Ryosei Akazawa will be in Osaka on Saturday to receive the U.S. delegation led by Bessent.
The two-year JGB yield JP2YTN=JBTC fell 1.5 bps to 0.765%.
The five-year yield JP5YTN=JBTC fell 3.5 bps to 1.045%.
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