Japan’s 10-year government bond yield will continue to rise for the next 9 months.

The government needs to replace ¥4.3 trillion in annual revenue lost from its planned food tax cut in April 2027. Yet ministries have proposed removing only three of 121 tax breaks under review. Large manufacturers’ research and development credits remain protected by government growth priorities, leaving small firms more exposed to cuts. Their preferential 15% corporate tax rate and wage-increase credit are under review, but even ¥300 billion in savings would cover less than 7% of the food tax cut’s annual cost. Unused public funds could bridge the shortfall temporarily. If the government proceeds without recurring revenue or spending cuts, investors will anticipate additional bond issuance and demand higher yields. That would raise the cost of new borrowing and refinancing, leaving the government with a larger interest bill alongside the unresolved funding gap.