Japan held a five-year government bond auction on June 22 that recorded its lowest bid-to-cover ratio in months, at 3.11 against a historical average of 3.47. This weak demand comes as the yen trades above 160 per US dollar, a level that fuels inflation concerns in a country dependent on energy and food imports. The prospect of monetary tightening by the Bank of Japan adds pressure on bond markets, with borrowing costs that could rise significantly for a country whose public debt is among the highest of developed economies.
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