Japan to introduce new range of JGBs targeting retail buyers, sources say

Japan is expected to introduce a new range of government bonds targeting retail buyers, three government sources said on Wednesday, a move aimed at filling a void left by diminishing central bank buying.

The new line-up will include inflation-linked bonds and super-long Japanese government bonds (JGB) limited to purchases by households, said the sources, who spoke on the condition of anonymity.

The move would come as JGB yields hit multi-decade highs on investor concern over inflation risks and the administration’s plan to compile an extraordinary budget funded by additional debt.

The Ministry of Finance, which oversees debt issuance, will discuss the idea in a meeting with experts and academics scheduled on May 26, they said. The sources were granted anonymity as they are not authorised to speak publicly.

The MOF was not immediately available to comment.

While still owning 49 percent of JGBs sold in the market, the Bank of Japan is gradually slowing purchases as part of its efforts to wean the economy off a massive, decade-long stimulus.

The MOF is targeting households to broaden the investor base for JGBs as the shrinking central bank presence and falling demand among private financial institutions make yields more susceptible to sharp swings.

For retail buyers, the MOF currently issues floating-rate 10-year JGBs as well as 3-year and 5-year fixed-rate notes. Such products, long unpopular due to prolonged low rates, have seen demand increase as BOJ rate hikes push up yields.

Of the total 180.7 trillion yen (US$8.91 trillion) in JGBs scheduled to be issued in the current fiscal year that began in April, retail buyers make up just 4 percent, MOF data showed.

Reuters

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