Japan Rejigs Bond Strategy: Short-Term Push, Long-Term Pullback in FY2025/26

Japan’s Ministry of Finance is set to recalibrate its bond issuance strategy for FY2025/26, trimming overall market supply while shifting focus toward short-term instruments and retail investors. The draft revised plan slashes scheduled Japanese Government Bond (JGB) sales by ¥500 billion, bringing the total to ¥171.8 trillion, as the government adapts to evolving market dynamics and monetary policy signals.

 

Key Highlights:

 

Sales of 20- and 30-year JGBs will be cut by ¥900 billion each, reducing issuance to ¥11.1 trillion and ¥8.7 trillion, respectively.

Short-term debt gets a boost: Issuance of 2-year JGBs, 1-year, and 6-month Treasury Discount Bills will each rise by ¥600 billion, reflecting stronger demand for liquidity and flexibility.

Retail focus sharpens: JGB sales to households will increase by ¥500 billion, reaching ¥5.1 trillion, signaling a push to diversify the investor base and stabilize funding.

The move marks the third consecutive year of reduced JGB issuance, aligning with expectations of a gradual exit from ultra-loose monetary policy by the Bank of Japan.
 

Analysts suggest the shift reflects investor preference for shorter durations amid rising yields and uncertainty around long-term rate trajectories.

 

This strategic pivot underscores Japan’s balancing act—managing debt sustainability while preparing for a post-negative interest rate era. The emphasis on short-term and household-targeted bonds may also help cushion volatility as global rate cycles evolve.

 

Sources: MarketScreener, The Business Times, Ministry of Finance Japan