Thu Dec 26 03:29:00 UTC 2024: ## Japan to Increase Government Bond Sales, Shift to Shorter-Term Debt
**Tokyo, December 26, 2024** – Japan’s Ministry of Finance plans to slightly increase the issuance of Japanese government bonds (JGBs) to 172.3 trillion yen ($1.1 trillion) in the next fiscal year, marking the first rise in four years. This increase aims to offset the Bank of Japan’s (BOJ) shrinking presence in the JGB market, which has been significantly reducing its bond holdings this year.
To attract buyers, the government will shift a larger portion of the sales towards shorter-term debt to tap into the demand from Japanese banks. This is a strategic move to replace the BOJ as a major JGB holder, mitigating the risk of a surge in bond yields. Conversely, sales of longer-term bonds (30 and 40-year JGBs) will be reduced due to decreased demand from life insurers. This reduction in 40-year JGB sales marks the first time in seven years and the largest since their introduction in 2007.
Specifically, sales of 5-year JGBs will increase by 1.2 trillion yen, while treasury discount bills will see a 2.4 trillion yen rise. Sales of 30-year and 40-year JGBs will be reduced by 1.2 trillion yen each. Sales of 2-year, 10-year, and 20-year JGBs will remain unchanged. Climate transition bonds will also be issued, although at a slightly lower volume than this year.
To further incentivize bank investment, the government is introducing a new type of short-term floating-rate note to mitigate rising yield risks. This move addresses the fact that Japanese banks currently hold only 14% of the JGB market, a significant decrease from 41% before the BOJ’s extensive asset-buying program in 2013. The government acknowledges that issuing too many short-term bonds could increase vulnerability to market fluctuations. The overall strategy reflects a significant adjustment in Japan’s debt management strategy in response to evolving market conditions and the BOJ’s policy shift.
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