“The yields of Japanese government bonds (JGB) have recorded a significant increase in the last year, With the 10 -year Bond that went from 0.80% in September 2024 to about 1.60% in July of this year. Even the 2 -year performance doubled in the same period, passing from 0.40% to 0.80%. These are the higher returns recorded by the JBG since 2008.This trend reflects a significant change in the Japanese monetary panorama, with the Bank of Japan (Boj) which continues its gradual exit from monetary policy ultra-accommodating “. Underlines it Daniel Siluk, Head of Global Short Duration & Liquidity, Janus Henderson Explaining that the Institute has maintained the reference rate to 0.50% in the last meeting in June, but increased the reference rate from -0.10% in March 2024, when it started cycle of rise.
Although the decision Precent ù was to suspend rates of the rates, the boj He continued his tightening campaign by starting to reduce purchases of bonds, with the aim of bringing the monthly purchase DJGB from the current 4.1 trillion of yen 2 trillion of yen by 2027 an investigation at the community of investors in May.
Why right now?
This process Of normalization It is taking place in a persistent inflation context, which for over three years has remained above the objective of 2.0% set by the boj. The path of tightening of the monetary policy of the central bank must now face obstacles in the form of internal political uncertainty. After the decisive elections of the high chamber of July 20, the markets are serving the risk of a tax expansion and a political resistance to further increases in the rates.
The parties of the opposition they based the their election campaign On programs that include cuts in consumption taxes and a more accommodating monetary policy, which could push the boj to delay further tightening. However, the possibility of an increase in tax expenditure, which could be financed with the issue of additional bonds, has already pushed the long -term yields at the highest levels of the last decades, with the performance of the Japanese government bonds at 30 who has reached 3.2% in May.
Because it is important, and not just for Japan
The implications for i global rates are significant. The role of Japan as an important capital exporter implies that a scenario of continuous increase in internal returns could reduce the appetite of Japanese investors for foreign bonds, in particular Treasury titles US and European sovereign debt. This could exert a pressure up on global returns, especially in the long part of the curve. Furthermore, if the Tokyo tax trajectory should deteriorate further, this could trigger more widespread concerns about the sustainability of sovereign debt in other highly undue economies, amplifying volatility on global bond markets.
In summary, the cautious normalization of the Boj – explains the expert – is put toThe test both from the internal political dynamics and from global macroeconomic uncertainty. The strong increase in the yields of Japanese government bonds is not only a local phenomenon, but it is a signal that the era of the repression of global returns and of the “new normality” of the global financial crisis, characterized by low and quantitative easing monetary policy, has come to an end. Welcome back to “Old normality”.
