Japan's Bond Yields Neared 27-Year High as Fiscal Policy Worries Mounted

Akira Ito
24 Dec, 2025
Tokyo

Japan's market indexes struggled to rebound from the previous session's close, as the domestic government inched closer to finalizing its upcoming fiscal year's budget. 

The Nikkei 225 Stock Average and the broader Topix traded around the flatline amid improving confidence as the year-end approached. 

Market sentiment recovered following a rise in overnight trading in New York after the preliminary estimate of the U.S. economic growth in the third quarter surpassed expectations. 

GDP in the third quarter expanded at an annual pace of 4.3%, accelerating from 3.8% in the second quarter, according to a Commerce Department report released Tuesday. 

The increase in economic activities was mainly driven by a 3.5% rise in consumer spending from 2.5% and exports expanding 8.8% from -1.8% in the second quarter, respectively. 

Government spending recovered to an increase of 2.2% from a decline of 0.1% in the previous quarter, driven by the persistent rise in defense spending as well as buyouts for federal workers. 

However, fourth-quarter GDP growth is likely to be sharply lower because of a 43-day federal government shutdown. 

Tuesday's report is likely to give the Federal Reserve fewer reasons to raise rates after the next policy in late January. 

The yield on 10-year Japanese government bonds hovered above 2%, and the Japanese yen weakened to 155.86 against the U.S. dollar. 

Closer to home, Japan's lawmakers inched closer to approving a record 122 billion yen budget for the upcoming fiscal year 2026, as the newly appointed Prime Minister Sanae Takaichi's administration plans to provide additional stimulus of 21.3 trillion yen to ease household costs.

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average edged up 0.03% to 50,429.56, and the broader Topix eased 0.4% to 3,410.57. 

Japan Post Bank rose 0.1% to ¥2,127.50, Daiichi Sankyo edged up 0.2% to ¥3,338.0, and Nomura Holdings decreased 0.3% to ¥1,293.50. 

Seven & I Holdings gained 0.1% to ¥2,235.50, Fast Retailing decreased 0.6% to ¥56,630.0, and Takashimaya Co. Ltd fell 0.1% to ¥1,632.0.