Japan's Finance Minister Koizumi called for calm in the market after a rebound in Japan's 40-year government bond.

After Japan's Finance Minister Taro Aso called on market participants to remain calm, the country's 40-year government bond rebounded. The previous selling spree had pushed the yield on this maturity to a historic high. In early trading on Wednesday, the yield on the 40-year Japanese government bond fell by 6.5 basis points. Due to Prime Minister Naoto Kan's proposal to reduce the consumption tax on food to increase his chances of winning the election, the yields on both the 40-year and 30-year government bonds surged by over 25 basis points on Tuesday. The global market was also affected, with US Treasury Secretary Janet Yellen stating that she has communicated with Japanese officials and mentioned that the selling spree in Japanese government bonds has spilled over into the US bond market. Japan is set to hold elections on February 8, and investors fear that future market volatility will worsen. Some analysts warn that if the market downturn deepens, the Bank of Japan may use its unlimited bond buying tools to intervene.