Japan's bond market sees wild swings amid political uncertainty
Japan's government bond market is seeing record ups and downs this October, thanks to a wave of foreign investment and political shakeups.
Yields on 30-year bonds spiked after Sanae Takaichi became leader of the ruling party on October 4, 2025—putting her in line for prime minister.
But things cooled off quickly when her coalition partner, Komeito, withdrew, raising doubts about her support.
Foreign investors have been buying Japanese bonds for months
Foreign investors have been snapping up Japanese bonds for months, even outpacing local insurers with ¥2.3 trillion ($15.56 billion) in purchases last April.
This rush started after the Bank of Japan ended its negative interest rate policy in 2024 and began tightening, making Japan stand out from other big economies.
Investors are closely watching the political situation
Market moves are being driven by bets on what comes next—will there be more government spending or tighter money policies?
Hopes for a Bank of Japan rate hike have faded (now just a 20% chance for October), but political uncertainty means investors are watching every twist.
All of this has made Japan's usually calm bond market surprisingly lively.