The 'widow-maker' trade, a strategy of shorting Japanese government bonds, has become highly profitable as Japanese bonds have plummeted over 4% this year due to rising yields, inflation concerns, and fears of fiscal policy changes, making it one of the most lucrative bets in the global bond market.
Japan's Nikkei stock index hit a record high following the election of Sanae Takaichi, who is expected to pursue expansionist fiscal and monetary policies, leading to a weaker yen and a steepening yield curve in bonds, with market expectations of potential rate hikes by the Bank of Japan.
Japanese long-term bonds have sharply fallen, with yields rising due to concerns over fiscal policy, upcoming elections, and global market impacts, raising fears of increased government spending and debt costs.
Japan's bond market has experienced a surge in volatility, impacting global markets as rising yields in Japanese government bonds influence other sovereign debt markets worldwide, driven by the end of yield-curve control and increased global economic concerns.