Japan’s Bond Market Crisis Deepens as Long-Term Debt Demand Collapses

Japan’s government bond market faces unprecedented stress as yields surge to record highs amid evaporating demand. The 30-year yield spiked to 3.2% from 2.3% earlier this year, while a failed 40-year bond auction saw yields leap to 3.7% - with Tokyo traders describing the situation as a "buyers’ strike."

Demographic shifts are accelerating the crisis. Postwar baby boomers, traditionally reliable buyers of long-dated debt, are withdrawing from markets during retirement. Life insurers - previously forced buyers of long-term bonds - have abruptly retreated, leaving auctions undersubscribed. A recent 20-year bond sale recorded the weakest demand since 2012.

The collapse manifests in stark metrics: this week’s 40-year auction produced the worst bid-to-cover ratio in nearly a year. With institutional buyers vanishing and yields becoming untethered, policymakers scramble to prevent a full-blown funding crisis.