Japanese government bonds rise; traders assess the fiscal impact of setbacks for the ruling coalition in Japan.

Japanese government bonds rose on Tuesday as investors returning from the long weekend assessed the impact of the ruling coalition's recent defeat in the Senate elections on the fiscal situation. The benchmark 10-year Japanese government bond futures rose by 0.2 yen to 138.55 yen, with mixed trading in early session. The yield on the 10-year Japanese government bonds fell by 1 basis point to 1.51%. The ruling coalition in Japan lost control of the Senate in Sunday's elections, a setback that was widely expected and further weakened Prime Minister Shizo Abe's authority. While this election does not directly determine the fate of the Abe government, and he has vowed to remain temporarily, the result could lead to policy paralysis or an increase in fiscal deficit; the main opposition party is calling for a reduction in consumption tax with debt support to ease the burden of rising living costs for the public. Daisuke Uno, Chief Strategist at Sumitomo Mitsui Bank, said, "The election failure shows that voters are saying 'no' to cash handouts, which means that the opposition party's proposal to reduce the consumption tax seems more likely to be realized, although the scale and duration are still uncertain."