By Kevin Buckland
TOKYO, Dec 26 (Reuters) – Japan’s finance ministry will over the next fiscal year issue the fewest super-long government bonds, known as JGBs, in 17 years, according to a plan approved by the cabinet on Friday.
The reduction by nearly a fifth from the previous fiscal year to bonds worth around 17.4 trillion yen ($111.6 billion), reflects the new administration’s sensitivity over the rise of JGB yields to a series of record highs in recent weeks.
The increase has been driven by market expectations that Prime Minister Sanae Takaichi’s expansionary fiscal policies will add to a debt burden that is already the biggest among developed nations.
Yields rise when bond prices decline.
The issuance plan was in line with a Reuters report on Thursday.
TAKAICHI HAS SOUGHT TO EASE MARKET CONCERNS
Takaichi sought to ease market concerns this week by saying the government’s draft budget maintains discipline by limiting reliance on debt.
A bond market selloff earlier this year forced the finance ministry to make a rare revision in June to its issuance plan for the current fiscal year, which runs from April to the end of March.
That led to a reduction in super-long bond issuance to 21.4 trillion yen from 24.6 trillion yen.
From the beginning of the next fiscal year, the ministry will hold a hearing with market participants around June every year to gather feedback and respond as needed.
Reuters reported last month that the ministry was considering such a meeting.
Total JGB issuance, including super-long bonds, next fiscal year will be 180.7 trillion yen, almost 5% less than the current fiscal year’s total including the supplementary budget.
The finance ministry refrained from increasing issuance of benchmark 10-year JGBs, while raising issuance of two- and five-year notes by a combined 2.4 trillion yen.
The Bank of Japan’s retreat from a decade-long radical stimulus programme is pressuring the government to shorten the duration of bonds as market players seek to reduce risks around interest rate hikes.
Retail JGB issuance will climb by half a trillion yen to just under 6 trillion yen.
($1 = 155.8400 yen)
(Reporting by Kevin Buckland; editing by Barbara Lewis)
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