The Japanese government bond (JGB) market has entered a period of relative stabilization following a month of historic volatility. As of mid-February 2026, the 20-year JGB yield is hovering near **2.97%**, pulling back from an almost three-decade peak of **3.46%** reached in late January. This cooling follows a period of intense selling triggered by Prime Minister Sanae Takaichi’s pledge to suspend the **8%** consumption tax on food for two years. While the initial announcement sparked fears of deficit-financed spending, the ruling coalition's landslide election victory on February 8 has provided the political mandate necessary to pursue a more "responsible" stimulus package. Market participants have taken comfort in recent government communications suggesting the tax cuts will be funded without significantly increasing the issuance of deficit-financing bonds. This shift in tone has eased the "mini-Takaichi shock" that saw 40-year yields briefly breach the **4.0%** threshold last month. A recent auction of 20-year bonds showed stable, albeit moderate, demand. While the bid-to-cover ratio remains below historical averages, the presence of foreign investors and domestic life insurers has prevented a further spike in yields. Foreign demand is particularly focused on hedged bonds, which now offer more attractive returns compared to earlier in the year. The Ministry of Finance is also supporting the super-long end of the curve by reducing issuance volumes. The plan for fiscal year 2026 includes a reduction in super-long bond issuance by approximately **100 billion yen** per month, a move designed to address the structural demand gap in the **20- to 40-year** sector. Monetary policy remains a secondary but critical factor. The Bank of Japan maintains its policy rate at **0.75%**, with market expectations leaning toward a potential hike to **1.0%** or **1.25%** by late 2026. Governor Kazuo Ueda has reassured markets that fiscal policy will not obstruct the bank's path toward normalization. The 10-year yield is currently trading near a six-week low of **2.14%**, reflecting a broader trend of "unclenching" across the JGB curve. Despite this calm, a "duration gap" persists among domestic insurers, who remain cautious as they wait for higher entry points, suggesting that while the immediate crisis has passed, the long-term yield floor has moved significantly higher than in previous years.