The debt crisis in France does not stop leaving holders in recent months, and now, at the end of summer, the situation has rehearsed and promises a complicated autumn for the French debt market. The risk premium of France is shooting And the country’s bonus has just touched 3.53% of expiration, the highest level that has been seen since April 2011. The distrust of investors has to do with political news, but the substantive trend, which has been consolidating for several years, is based on public accounts that do not fit in a country that is being unable to cut expenses for political and electoral pressures. However, foreign investors are also playing a role, With Japan as one of the protagonists. Since 2020, French debt sales by Japanese investors have moved to the French bond, and now the story is repeated again.
In the last decades Japan has become the most important foreign investor in world fixed income markets, and hence the weight that the Japanese country is now having in the French bonus reaction. The data you collect Bloomberg Intelligence They leave no doubt: Between the end of 2021 and early 2022, investment flows from Japan to the French bond market began to contract quicklycontributing to the increases in expiration of expiration that has suffered the French title in recent years.
Huw Worthington, strategist of types of Bloomberg Intelligencehe explains: “The channel that generates the increases of the risk premium of France often takes place through the sales trend by foreign investors, the political volatility being the reason that explains it. French debt differentials with German have shown direct correlation with investment flows from Japanwith the 2017, 2022 and 2024 elections leading to investors sales in Japan, “he says.
It must be remembered that now, the main French public debt holders are not French: according to the data published by the Bank of France, at the close of the first quarter of 2025 54.7% of the country’s public debt was in the hands of non -resident investors, a category in which any non -French is included. With The European Central Bank in Retiredin the process of cutting its asset balance, this market structure threatens France, having less and less control over its own debt market.
The importance of Japan, the great foreign buyer
Although France officially does not break Bloomberg Intelligence They estimate that the Japanese country would still have, at least 80,000 million euros in French bonds), others are clear that the Asian country has a large debt of large European economies, such as France, for the attraction they have had in recent years against the Japanese bonus.
In fact, this summer has already seen with concern the great ‘ninja’ adjustment of Japan: a massive sale of German titles, which, for analysts, It is a silent structural adjustment by Tokyo.
Keep in mind that the French bonus has offered greater profitability to expiration than Japanese in recent years, with the exception of the pandemic years, when the French bonus came to offer less than the Japanese. During the rest of the time, Japanese investors have seen in the French debt a profitable, and apparently safe alternative, to deposit their money, in front of Japanese bonds that have maintained a very low profitability in front of the rest of the world. It is the same logic that led Japan to become the largest American debt foreign holder, a milestone that still maintains today.
The problem for France is that now its political and economic crisis coincides with the return of inflation to Japan, a milestone that has contributed to increase the expiration of the expiration of Japanese bonds, and thus, these are each time a more attractive alternative to other bonds, for example, those of France.
From Barclays, experts Yun Zhang, Volohiro Mikajiri and Masaru Yamada, explain this trend that has settled in the country. “For many years, the Bank of Japan has maintained extremely low types, or negative, to boost inflation and stimulate growth, against the Federal Reserve and other central banks, which have maintained higher types to combat inflation. This has led investors domiciled in Japan to look for higher returns, “British bank experts point out.
Now, at a time when the Asian country is having trouble getting the expected demand in its bond auctions, the increase in the profitability that the market is generating, adapting to this new Japanese reality, of more inflation, higher types and a central bank that stops buying everything, is being an added problem for France’s debt.
Agencies review the rating soon
The Gallic Government, whatever the one consolidated in the country, will have to deal with the rating reviews that will occur in the coming months. Both Fitch and S&P have warned of the possibility of a cut in the qualification if the country fails to approve a credible fiscal consolidation plan, and The next reviews are placed on the calendar for September 12, in the case of Fitch, and on November 28, in S&P.
In addition, everything indicates that the European Central Bank is already determined to end the type descent process. The ECB barely contemplates a last cut in the price of money in the coming months, as it could be appreciated in the minutes of the last meeting of the Central Bank (on September 11 it meets again and will make a decision on the types), which means that France will not be able to count on an ECB aligned with its problem, with declines of types that would help refinance the debt to more affordable levels. This can also weigh in the decision of the qualification agencies of the coming weeks.
However, the increase in the profitability of French bonds can be the trigger that ends up forcing the country’s politicians to approve a spending draft program. The Meno is awaited from Generali Investments, who warn that “Prime Minister Bayrou will lose the motion of trust on September 8. This points to a difficult fiscal consolidation, in a complicated social and political context. The vigilants of the bonds are showing their teeth; it is possible that the differentials have to expand even more so that the righteous OF ANALYSIS OF GENERALI AM.
