Japan’s 10-year government bond auction on June 3, 2025, showed strong investor demand, offering temporary market relief ahead of the 30-year bond sale scheduled for June 5. The 10-year bid-to-cover ratio climbed to 3.66, its highest since April 2024, helping ease concerns over rising long-term yields and the Bank of Japan’s reduced bond-buying activities. However, attention now shifts to the upcoming 30-year debt auction amid continued global worries over fiscal deficits and investor appetite for longer-term bonds.
Japan’s Ministry of Finance has successfully completed a ¥2.6 trillion ($16.6 billion) auction of 10-year government bonds, offering short-term relief to markets ahead of a more challenging 30-year bond auction scheduled for June 5. The sale saw stronger-than-expected demand, easing investor concerns about Japan’s rising long-term yields and shifting monetary policy environment.
The bid-to-cover ratio for the 10-year bonds climbed to 3.66, the highest since April 2024, up from 2.54 at last month’s sale. The result lifted government bond futures to 139.15 as of 3:45 p.m. in Tokyo, while the 10-year yield fell by 2.5 basis points to 1.48%.
Japan’s bond market, long supported by massive purchases from the Bank of Japan (BOJ), is adjusting to a new phase as the central bank gradually retreats from its aggressive stimulus strategy. The BOJ, headquartered in Tokyo, has been reducing its bond buying by ¥400 billion each quarter since last summer. The move has led to steepening of the yield curve and increased scrutiny over who will absorb future debt issuances.
Kazuo Ueda, Governor of the BOJ, indicated during a parliamentary session on June 3 that the bank may slow its bond purchases further next fiscal year. The BOJ is expected to review its bond buying plan during its June 16–17 policy meeting.
While the 10-year auction result was seen as a positive sign, analysts warned that challenges remain, particularly with the upcoming 30-year bond auction. Yields on 30-year bonds reached 3.185% last month—the highest since the maturity was introduced—highlighting concerns about demand for longer-term securities amid global fiscal uncertainty.
Global investor anxiety about widening budget deficits and heavier debt loads has added pressure to long-dated government securities worldwide. Japan’s finance ministry has reportedly issued a questionnaire to market participants, gauging their views on future bond issuances, possibly signaling upcoming adjustments.
As Japan navigates a transition from decades of artificially low yields to more market-driven rates, the coming 30-year auction is expected to be a crucial test of investor confidence in the country’s long-term fiscal outlook.
