Core Viewpoint - The article discusses the ongoing turmoil in the global bond market, particularly focusing on Japan's long-term debt issues and the implications for both Japanese and U.S. bonds, highlighting structural fiscal challenges that remain unresolved [2][9]. Group 1: Japanese Bond Market - On May 27, Japanese bonds rebounded due to speculation that the Japanese Ministry of Finance might reduce the issuance of ultra-long bonds, leading to a drop in yields to three-week lows [2][5]. - However, on May 28, the auction for 40-year Japanese bonds was seen as a "canary in the coal mine," with the bid-to-cover ratio falling to its lowest level since July 2024, indicating weak demand despite previous short-term positive signals [4][6]. - The yield on 40-year Japanese bonds rose by 8 basis points to 3.365% before the auction, reflecting market concerns about fiscal sustainability [6][11]. Group 2: U.S. Bond Market - The article notes that U.S. Treasury yields also fell on May 27, with the 10-year yield dropping by 6.25 basis points to 4.44%, but the overall outlook remains bearish due to ongoing fiscal concerns [2][9]. - Analysts express that the U.S. bond market is likely to remain in a bear market, driven by fiscal risks exacerbated by recent tax legislation that could add $4 trillion to the national debt over the next decade [9][10]. - The 10-year Treasury term premium is currently near its highest level since 2014, reflecting heightened anxiety over fiscal challenges and political uncertainty [10]. Group 3: Broader Market Implications - The article emphasizes that the structural fiscal issues in both Japan and the U.S. are unlikely to be resolved in the short term, leading to continued volatility in bond markets [2][9]. - The demand for long-term Japanese bonds has weakened significantly, with major traditional buyers like life insurance companies showing reduced interest, contributing to a supply-demand imbalance [10][11]. - Japan's government is projected to face annual debt servicing costs nearing $230 billion over the next four years, raising concerns about the sustainability of its fiscal position [11].

Core Viewpoint - Japan's national debt is projected to reach a record high of 1,323.7155 trillion yen by the end of the fiscal year 2024, reflecting a significant increase due to rising government expenditures amid inflation and insufficient tax revenue [1][2]. Group 1: National Debt and Budget - The total national debt, consisting of government bonds, loans, and short-term securities, has increased by 26.554 trillion yen compared to the end of the fiscal year 2023, marking the ninth consecutive year of record highs [1]. - The Japanese Diet approved a budget of 115.1978 trillion yen for the fiscal year 2025, which is the highest in history [2]. Group 2: Defense Spending - The defense budget has risen to approximately 8.7 trillion yen, surpassing the previous year's record of 7.9496 trillion yen [3]. - Criticism has emerged regarding the prioritization of military spending over addressing the impact of rising living costs on citizens [3]. Group 3: Economic Growth Data - The Cabinet Office has revised down the actual GDP growth for the fourth quarter of the previous year from 0.7% to 0.6% quarter-on-quarter, and from 2.8% to 2.2% year-on-year [4]. - There are indications that Japan's economy may experience negative growth in the first quarter of this year, according to economic analysts [4].