TOKYO, Dec 24 (Reuters) – Japan will likely reduce new issuance of super-long government bonds next fiscal year to around 17 trillion yen ($109 billion), the lowest level in 17 years, two government sources said on Wednesday, nodding to market fears of oversupply that have lifted yields for these notes to record highs.
In its debt-sale plan for next fiscal year, the finance ministry will also hold off on increasing issuance of benchmark 10-year Japanese government bonds (JGB), the sources said.
The expected move underscores the administration’s sensitivity to recent steady rises in bond yields, driven by market expectations that Prime Minister Sanae Takaichi’s big spending plans and expansionary fiscal policy will lead to huge debt issuance.
The ministry will consider reducing issuance of 20-, 30- and 40-year JGBs next fiscal year by 100 billion yen each per month, the sources said.
As a result, total issuance of super-long bonds next fiscal year would fall to the lowest since 2009, and below levels planned for the current fiscal year ending in March 2026.
The sources discussed the matter on condition of anonymity as they were not authorised to speak publicly. The ministry declined to comment.
Concern over the administration’s spending plans have hit super-long JGBs hard with yields for those notes climbing to record highs, and drawing calls from market participants for the ministry to reduce issuance of these debt.
A bond market selloff earlier this year forced the ministry to make a rare revision in June to its issuance plan for the current fiscal year, which led to a reduction in super-long bond issuance to 21.4 trillion yen from 24.6 trillion yen.
As for other maturity zones, the ministry will likely issue 31.2 trillion yen worth of 10-year JGBs next fiscal year. The monthly issuance amount, at 2.6 trillion yen, would be unchanged from this year’s level, the sources said.
It will also leave unchanged monthly issuance of 2-year JGBs at 2.8 trillion yen, and 5-year notes at 2.5 trillion yen, they said.
Takaichi, since taking office in October, has stressed the need to focus on revitalising the economy and signalled watering down the government’s target for restoring Japan’s finances.
Her administration is likely to finalise a record-sized annual budget next fiscal year on Friday, which would come on top of a 21.3-trillion-yen stimulus package compiled in November to cushion the economic blow from rising living costs.
As bond yields crept up, the administration has toned down talk of aggressive fiscal spending.
In an interview with the Nikkei newspaper published on Tuesday, Takaichi said the government will not resort to “irresponsible” debt issuance or tax cuts. She said Japan’s debt-to-GDP ratio, while improving as a trend, remained high.
($1 = 155.7000 yen)
(Reporting by Takaya Yamaguchi, writing by Leika KiharaEditing by Shri Navaratnam)
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