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The Investor Confidence Paradox: Why Markets Bet on Aging Japan Over Dynamic China

The Investor Confidence Paradox: Why Markets Bet on Aging Japan Over Dynamic China

Chinese 30-year bonds now yield less than Japanese ones for the first time in decades – how institutional reform trumps GDP growth

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Adrian Monck
Jul 15, 2025
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The Investor Confidence Paradox: Why Markets Bet on Aging Japan Over Dynamic China
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  • Bond investors are betting on Japan’s long-term growth prospects over China’s for the first time in decades, with Japanese 30-year yields now 87 basis points higher than Chinese yields

  • The Tokyo Stock Exchange’s reforms have triggered record share buybacks of 9.6 trillion yen ($65 billion) in 2023 as companies scramble to improve capital efficiency

  • China’s fiscal revenues are likely to decline in 2025 even if it meets growth targets, while running a 12% fiscal deficit amid persistent deflation

  • Half of new Japanese tax-free investment account (NISA) money has flowed into domestic equities, reversing decades of home bias against local markets

Something extraordinary is happening in global bond markets. Chinese 30-year government bonds now yield less than their Japanese equivalents – a reversal that would have been unthinkable just years ago.

On the surface, this doesn’t make much sense. Why would the world’s fastest-growing major economy offer investors lower returns than an aging society that has barely grown in over three decades?

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