Sales of Japan’s retail government bonds reach ¥5.14 trillion — The Japan Times
In Japan, sales of government bonds for retail investors rose by 84% year on year and reached a record ¥5.14 trillion, or about $33 billion, from April to September. Rising yields on Japanese government bonds are stimulating household demand for these securities, The Japan Times reports, citing Bloomberg data.
Household savings
Growing interest in retail bonds comes as the Bank of Japan reduces its purchases of debt securities and amid questions over who will finance the country’s government borrowing. Japanese households hold ¥1.13 quadrillion in cash and deposits, which could become an additional source of demand for government debt.
Shinichiro Kadota, head of Japan FX and rates strategy at Barclays, said potential household purchases of Japanese government bonds could be significantly larger than those of Japan’s Government Pension Investment Fund. According to him, purchases by households reduce the volume of bonds that institutional investors need to buy, which could restrain the rise in yields.
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Plans to expand the pool of buyers
Currently, government bonds held by individual investors amount to approximately 1.9% of their cash and bank deposits. If this figure returns to its 2008 high of 4.5%, it could mean additional debt purchases worth ¥28.5 trillion — 22% of the total volume of government bond issuance for the fiscal year.
Retail government bonds offer lower yields than comparable market securities, but generate more income than term deposits, while the minimum investment amount is ¥10,000. Japan’s Finance Ministry plans to expand the pool of buyers later this year to include non-profit legal entities and small unlisted companies. Finance Minister Satsuki Katayama also proposed adding government bonds to the tax-free NISA investment program. A bill has been submitted to the upper house of parliament that could increase demand by exempting part of retail government bonds from inheritance tax.
