Japanese bond yields are the highest in 40 years. The budget and a 'red flag' from PM Takaichi have markets nervous

Japan's Prime Minister Sanae Takaichi responds to questions from reporters at the Prime Minister's Office in Tokyo on May 25, 2026. Prime Minister Sanae Takaichi said on May 25 the government will compile a $19 billion supplementary budget to support households grappling with soaring everyday costs driven by the Iran war.

Japanese bond yields are the highest in 40 years. The budget and a 'red flag' from PM Takaichi have markets nervous. Japan's Prime Minister Sanae Takaichi responds to questions from reporters at the Prime Minister's Office in Tokyo on May 25, 2026. Prime Minister Sanae Takaichi said on May 25 the government will compile a $19 billion supplementary budget to support households grappling with soaring everyday costs driven by the Iran war. The budget was largely in line with market expectations, at about 3 trillion yen ($19 billion), but comes as Japan still struggles with higher energy prices, rising subsidy costs, and a weak yen. The budget also marks a reversal from her earlier position that extra spending was not needed. She also said the total bond issuance for the calendar year of 2026 would remain unchanged from the original budget pl...