Japan's 40-year bond hits 4% for the first time as PM Takaichi calls for snap elections

The yield on Japan's 40-year bond increased to 4%, the highest since its introduction in 2007 and the first for any maturity of the country's sovereign debt in over thirty years.

For the first time since the 20-year yield did so in December 1995, the 40-year rate increased by 5.5 basis points, bringing the yield on Japanese government bonds to 4%.

The gain highlights a broader selloff in Japanese bonds that has escalated due to worries that the country's finances will be negatively impacted by the government's intention to lower the food sales tax. A former ruling coalition partner and Japan's biggest opposition party merged to establish the Centrist Reform Alliance, which likewise seeks to raise the funds required to eliminate the food sales tax.

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The increase signifies a change in Japan's bond market, whose yields were significantly lower than those of its international counterparts due to years of extremely low interest rates. The yield on the country's 30-year bonds is higher than Germany's, which is currently at about 3.5%.

During a briefing on Monday, Japanese Prime Minister Sanae Takaichi formally called for an election on February 8 in an attempt to bolster her ruling Liberal Democratic Party's narrow parliamentary majority. Ahead of Tuesday's 20-year government bond auction, investors are also wary.