The bond market is starting to price in the risk that the Bank of Japan will end its stimulus policies before the government has fixed the nation's finances.
Japan's implied forward yield, an indicator of traders' expectations for the 10-year note rate in 2020, surged 36 basis points to 1.18 percent Tuesday. The benchmark yield doubled to 0.39 percent in less than a month, versus the 2 percent rate for similar-maturity U.S. Treasuries.
BOJ Gov. Haruhiko Kuroda has said the economic benefits of cheaper oil will help accelerate consumer-price increases later this year, and data released Monday showed that an inflation gauge rose more than expected in the fourth quarter amid disappointing growth. By contrast, the government with the world's biggest debt load has retreated from its goal of achieving a budget surplus by 2020.