Japan's Finance Ministry Plans to Increase Government Bond Sales for the First Time in Four Years

Forex - The Japanese Ministry of Finance plans to increase government bond sales for the first time in four years along with shorter-term debt issuances. The Ministry stated that in the fiscal year starting in April 2025, the market issuance through periodic auctions would rise by 1.3 trillion yen to 172.3 trillion yen ($1.09 trillion) compared to this fiscal year.

The Bank of Japan's retreat from its radical ten-year stimulus program has forced the government to shorten the duration of its bonds as market players seek to mitigate risks related to interest rate hikes. The largest increase will be seen in the sale of treasury bills, which will rise by an additional 2.4 trillion yen compared to this year, aimed at responding to the high demand for such short-term bonds.

The Ministry of Finance indicated that the BOJ will no longer purchase treasury bills with cash obtained from maturing government bonds. Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, stated, "The central bank wants to supply more treasury bonds to correct the distorted yield curve. The yields on treasury bills are currently very low due to high demand from the market. This situation does not reflect the upward trend in yields."

Sales of five-year bonds will be increased by 1.2 trillion yen to meet demand from local banks, rising to 28.8 trillion yen, while there will be no changes in the sales of two, ten, and twenty-year bonds. The average maturity of bonds in the market is 8 years and 5 months this year, which will be reduced to 8 years and 1 month next year.