Japan opposition urges bond buybacks as JGB volatility intensifies

Japan’s DPP called for decisive steps to calm bond and FX markets, warning ultra-long yield volatility risks destabilising broader financial conditions.Summary:DPP says market volatility has become “somewhat abnormal.”Tamaki urges decisive government and BOJ action.Proposals include bond buybacks and reduced 40-year JGB issuance.FX intervention should not be ruled out if yen weakens.BOJ can keep hiking gradually if wage growth holds near 5%.Japan’s opposition Democratic Party for the People (DPP) called on the government and the Bank of Japan to respond decisively to what it described as “somewhat abnormal” market moves, as volatility in long-dated Japanese government bonds continues to unsettle investors.Speaking in an interview on Tuesday, DPP leader Yuichiro Tamaki said market turbulence had intensified sharply and warranted a stronger official response. Beyond verbal guidance, Tamaki said authorities could consider concrete steps such as buying back government bonds or reducing issuance of ultra-long debt, including 40-year JGBs, to stabilise conditions. He also suggested the Bank of Japan could slow the pace of its bond-purchase tapering if volatility persists.Tamaki warned that unchecked rises in long-term interest rates risk spilling over into foreign-exchange markets. He said the government should not rule out FX intervention if efforts to curb excessive bond yield increases end up weakening the yen, underscoring the interlinked nature of rates and currency dynamics.While calling for flexibility on market stabilisation, Tamaki maintained that Japan’s gradual monetary normalisation should continue. He said the BOJ can keep raising interest rates in small steps, provided small and mid-sized firms are able to sustain wage increases of around 5%, signalling support for policy tightening anchored in durable income growth rather than market turbulence alone.-ps. Who is the DPP?The Democratic Party for the People is a centrist opposition party in Japan, formed in 2018 from elements of the former Democratic Party. It positions itself between the ruling Liberal Democratic Party and the more left-leaning opposition blocs, advocating fiscal responsibility alongside wage growth and middle-class support. While the DPP holds a modest number of seats in the Diet and is not a dominant force, its views are closely watched by markets during periods of instability, particularly as Japan heads toward elections and fiscal policy becomes more politically sensitive.Tamaki’s comments come as Japan’s bond market remains in focus following sharp moves in ultra-long yields, with investors assessing whether authorities will lean more forcefully against disorderly conditions.
This article was written by Eamonn Sheridan at investinglive.com.

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