Japanese Prime Minister Sanae Takaichi pledged on Monday to "control" bond issuance and act swiftly during market turbulence, aiming to reassure investors worried about the deterioration of Japan's public finances amid rising bond yields driven by the country's worsening fiscal position.

Speaking during a policy address to parliament, Takaichi said: "Fiscal sustainability is clearly a prerequisite for pursuing our 'responsible and proactive' fiscal policy." She stated that the Japanese government will continue to pursue fiscal sustainability while increasing spending to boost economic growth potential, including reviewing existing tax incentives and subsidy programs.

These remarks reflect growing concerns in Tokyo over the continuous rise in Japanese government bond yields. Japan's public debt is roughly twice the size of its economy, the highest among developed nations. As the Bank of Japan raises interest rates and gradually reduces bond purchases, financing costs are climbing.

On Monday, driven by market concerns over the risk of increased debt issuance and inflation worries stemming from the Middle East conflict, the yield on Japan's 30-year government bonds hit a record high of 4.235%. Rising bond yields will increase the financing costs of Takaichi's spending plans.

Takaichi said the Japanese government will attract private capital investment in economic growth areas through "implementing large-scale, long-term fiscal spending in a carefully planned and predictable manner." At the same time, she said the government will control the scale of annual bond issuance and adjust borrowing levels based on tax revenues, interest rates, debt financing costs, and economic and market developments.

Takaichi added: "If unexpected changes occur in the economy and markets, we will carefully examine their impact and respond flexibly as necessary." However, she did not elaborate on specific measures.

As concerns over the fiscal health of developed economies intensify and drive global bond yields broadly higher, the focus of parliamentary debate in Japan is expected to shift toward fiscal policy. The Japanese government is also preparing next year's budget, with government departments applying for record-scale spending.

The government's current priority is to push through legislation supporting Takaichi's plan. The plan proposes a two-year tax cut on food starting next April, but it has already triggered bond selling since the government has not yet detailed how it will cover the resulting fiscal revenue gap.

Additionally, Takaichi said the Japanese government will set aside multi-year funding for initiatives in strategically important economic security areas. Takaichi stated: "We will steadily implement various policies, get things done one by one, and communicate fully and carefully with the public and markets."