The Ministry of Finance plans to reduce government bond sales to ?190 trillion ($1.44 trillion) in the fiscal year beginning April 1, with cuts in the amount of short-term debt sold, according to a draft of the plan.
That number compares with the current year’s ?198.6 trillion, when extra Japanese government bonds (JGB) were sold to fund efforts to cope with an economic downturn triggered by the COVID-19 pandemic.
Several rounds of heavy fiscal stimulus to respond to the fallout of pandemic pushed up JGB market issuance to a record ?221.4 trillion in the last fiscal year ended March 31.
While targeting Treasury discount bills for cuts in JGB sales, the government would keep coupon-bearing bonds such as with maturities of 2-, 5-, 10-, 20-, 30- to 40-years unchanged from the previous year, the draft plan showed.
Extending durations of JGBs while cutting short-term bonds would help enhance a fragile debt structure that is vulnerable to fluctuations in interest rates. Short-term bonds account for around one third of overall calendar-based debt issuance.
By duration, some ?34.8 trillion of two-year bonds would be sold, and with 5-year bonds expected to raise 30 trillion, the draft showed.
The 10-year bonds, which serve as benchmark index for long-term rates, would raise ?32.4 trillion in sales. Some ?14.4 trillion would be raised with 20-year bonds, and ?10.8 trillion via 30-year bonds, it showed.
The 40-year bonds, issued once every two months, would be sold to raise ?4.2 trillion over the fiscal year, while liquidity enhancement auctions would raise a further ?12 trillion for the next fiscal year.
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