Japan govt to increase JGB sales for first time in four years

Japan plans to increase JGB sales to 172.3 trillion yen next fiscal year, targeting Japanese banks as major buyers.

Japan is set to raise scheduled sales of Japanese government bonds (JGB) slightly to 172.3 trillion yen ($1.1 trillion) next fiscal year from the current year, the first increase in four years, according to a draft plan seen by Reuters.

Much of the increase in sales of scheduled JGBs to the market will be made in shorter-dated debt to tap demand from Japanese banks, which the government hopes would partially replace the Bank of Japan (BOJ) as major holders.

The sales of super-long bonds, with maturities of 30 and 40 years, will be reduced to reflect shrinking demand from life insurers, as they mostly completed purchases for meeting new capital requirements.

The latest sale plan reflects the government’s efforts to fill a huge hole left by the BOJ’s diminishing presence in the JGB market.

The BOJ this year started tapering its huge bond-buying and reducing its holdings, which make up roughly half of total JGBs sold in the market, heightening the need for the government to find stable buyers to avoid a spike in bond yields.

Issuing too many shorter-term bonds, however, would require Japan to roll over debt more frequently and make its finances vulnerable to bond market swings.

JGB sales to the market have been set initially at 171 trillion yen for this fiscal year.