Masahiko Loo, Senior Fixed Income Strategist at State Street Global Advisors, said that the latest round of Japanese government bond sell-offs reflects the combined effects of global interest rate pressures and domestic fiscal concerns. He added that the supplementary budget further strengthens supply expectations.

In an inflationary environment, this is not surprising. The key lies in the yield curve—the spread between the 5-year and 30-year yields is once again approaching a historically wide level of over 210 basis points. Since 2025, when the spread reaches this level, the market typically stabilizes as valuations become attractive. He emphasized that this is not a financing issue; Japan is still mainly financed domestically, and household financial assets are about twice the size of its debt. Regarding contagion risk, the spillover effects should remain limited. The global impact is more reflected in gradual interest rate repricing rather than systemic risk, and Japan is unlikely to become a net seller of foreign assets.