Bond Markets and U.S. Pressure Step In as Japan Drops Spending Caps

Takaichi’s push to expand AI and semiconductor investment threatens to push up Japanese government bond yields

Rising long‑term bond yields could force Japan to exercise greater restraint on public finances. (Source photos: Nikkei)

RIEKO MIKI

September 1, 2026 00:55 JST

TOKYO — Prime Minister Sanae Takaichi’s administration has removed spending limits in key strategic sectors from the fiscal 2027 budget, leaving the bond market and U.S. pressure as the primary mechanisms to check ballooning expenditures on policy initiatives.

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