Institution: Japan's reduction of the consumption tax on food will put pressure on Japanese government bonds

Golden Finance July 28｜Keisuke Tsuruta, Senior Fixed Income Strategist at Mitsubishi UFJ Morgan Stanley Securities, said that the government’s local media-reported plan to reduce the food consumption tax to 1% would have a negative impact on the bond market. He stated that it remains unclear how the funding gap, which could be as much as 5 trillion yen (30.5 billion USD) per year, will be filled, further intensifying market concerns. He also mentioned that market participants are becoming increasingly cautious about taking on interest rate risk; upward pressure on financing costs may persist. The sources of funds for over 370 trillion yen in public and private investment, refinancing of bridge bonds, and the country’s mounting defense spending remain unknown.