South Korea and Japan Move to Cut Government Bond Supply Amid Global Bond Selloff
nashnova research
South Korea slashed ₩5 trillion from its October bond issuance plan while Japan's prime minister pledged to cap annual government-bond supply — both acting on the same day as global yields hit multi-decade highs, though the market's central question remains unanswered: can selling less debt actually bring rates down?
How much did South Korea cut, and how?
October bond issuance was trimmed from a planned ₩17 trillion to ₩12 trillion — a single-month cut of ₩5 trillion.
The reduction spans every maturity: ₩1 trillion off 2-year, ₩800 billion each off 3- and 5-year, ₩700 billion each off 10- and 30-year, ₩200 billion off 50-year — the entire curve, not just one segment.
The replacement funding source: stronger-than-expected tax revenue. This means → Seoul collected more tax than budgeted, so it can retire planned issuance without needing to borrow elsewhere.
Markets expect further cuts in November and December, potentially pushing the full-year reduction past ₩10 trillion.
What did Japan promise?
Prime Minister Sanae Takaichi said on October 1 that the government would "appropriately control the annual total of government-bond issuance," factoring in both the initial budget and any supplementary budgets.
In plain terms = Tokyo promised debt issuance won't spiral — but gave no hard number. This is a directional signal, not a binding cap.
Takaichi also weighed in on the yen, telling reporters she had raised the issue of yen undervaluation with President Trump, while insisting Japan's economic policies "are not aimed at manipulating foreign exchange."
This reflects a two-front squeeze: surging bond yields on one side, a politically sensitive currency on the other — and shrinking room to maneuver on either.
How bad is the global bond selloff?
The U.S. 10-year Treasury yield rose to 5.348%, surpassing its 2007 peak and hitting its highest level since 2002. The 30-year yield also reached a 2002-era high.
The U.K. 30-year gilt yield hit 6% — its first time there since March 1998. French government-bond yields touched an 18-year high, and the France-Germany spread widened to its most since June 2012.
Japan's 10-year yield climbed to 3.11% — a striking number for a country that lived with ultra-low rates for decades.
The Bloomberg Global Aggregate government-bond total-return index yield has risen to its highest since 2000. Global bonds have lost 2.7% year-to-date.
What is driving the selloff?
Four forces are hitting at once: escalating Middle East tensions pushing up energy prices, persistent inflation, global government debt crossing $40 trillion for the first time, and widening fiscal deficits across major economies.
This means → no single trigger — it is "high inflation + high deficits + geopolitical risk" stacking up together. Bond investors are demanding higher compensation for every dollar they lend.
In plain terms = more governments are borrowing more, and the risks are growing. Buyers are saying: pay me a higher rate, or I walk.
Can issuing less debt actually bring rates down?
Gilles Moec, chief economist at AXA Group, put it bluntly: "Even though some key thresholds have been breached, long-end yields may not yet have reached a self-stabilizing level."
This means → rates may not have peaked — the market has not yet found a point where it says "high enough, I'll stop selling."
South Korea and Japan are working the supply side: issue fewer bonds → less paper in the market → prices should recover and yields fall. But the core tension sits on the demand side: as long as fiscal deficits keep expanding, investors' doubts about governments' ability to repay will not fade.
In plain terms = cutting issuance is a painkiller, not a cure. If deficits keep growing, the market will eventually demand even higher rates.
市场有风险，内容仅供研究参考，不构成投资建议。