The bid-to-cover ratio at Thursday’s sale was 3.86 compared with 4.55 at the previous auction and a 12-month average of 3.49. Japan’s bonds held gains after the sale.

The nation’s super-long bond yields remain elevated as investors raise concern over fiscal policy as Prime Minister Sanae Takaichi pursues costly initiatives including a long-term growth investment programme and higher defence spending. Japan’s ruling Liberal Democratic Party (LDP) also approved a plan to temporarily cut the sales tax on food items for two years, even as the specifics over how it will be funded remain unclear.

“With yields close to 4%, the auction drew a decent result and could provide positive momentum for the market going forward,” said Miki Den, senior rates strategist at SMBC Nikko Securities Inc. “Some market participants are also hoping that the proposed tax cut could be withdrawn, as opposition to the policy has emerged within the LDP.”