Japan's issuance of ultra-long-term government bonds has fallen to 17.4 trillion yen, a 17-year low, in an effort to control yields and stabilize the market.
The Japanese Ministry of Finance has announced its bond issuance plan for the next fiscal year, totaling 168.5 trillion yen. The most notable move is a sharp reduction in the supply of ultra-long-term government bonds. Issuance of ultra-long-term bonds has been reduced to approximately 17.4 trillion yen, a 20% decrease from the previous year and the lowest level in nearly two decades.
This decision comes as yields on 30-year and 40-year Japanese government bonds reach record highs, signaling a financial risk given that the country's public debt currently stands at around 240% of GDP. Meanwhile, the issuance of 10-year bonds remains unchanged, while the issuance of bonds for individual investors has increased to approximately 6 trillion yen, indicating the government is encouraging greater participation from individual investors in financing public debt.
A strategy to balance debt management and market stability.
The reduction in the issuance of ultra-long-term bonds, including those with maturities of 30 to 40 years, aims to limit the potential for further yield increases and reduce long-term borrowing costs. This prudent measure helps the government avoid requiring the Bank of Japan to take drastic intervention measures in the market, while maintaining fiscal stability in the long term.
This approach represents a deliberate balancing act by Tokyo. By keeping 10-year bond issuance stable, the government ensures that core financing needs are met. At the same time, increased participation from individual investors helps to diversify risk and strengthen the domestic investor base, reducing reliance on institutional and international investors.
Analysts are closely watching this move as it shows the Japanese government is proactively acting to protect market confidence before the situation escalates. Reducing the issuance of ultra-long-term bonds also sends a clear signal to the global investment community that Tokyo is fully aware of the financial risks and is taking appropriate control measures.
However, this strategy also highlights the significant challenge of managing one of the world's largest public debt markets. The combination of reducing long-term supply and increasing private investor participation may help maintain yields in the short term, but long-term effectiveness will depend on the ability to attract private investors and maintain market confidence. This is a cautious but essential step for Japan's fiscal governance during this challenging period.
