Japan’s Finance Ministry has officially approved a significant reduction in the issuance of super-long government bonds, aiming to stabilize a bond market shaken by recent surges in yields. Beginning in July, the ministry will trim the volume of 20-, 30-, and 40-year bonds sold in regular auctions by a combined ¥3.2 trillion (about $22 billion) through the end of March 2026. Specifically, 20-year bond issuance will be reduced by ¥1.8 trillion to ¥10.2 trillion, 30-year bonds by ¥0.9 trillion to ¥8.7 trillion, and 40-year bonds by ¥0.5 trillion to ¥2.5 trillion.
This move comes after a period of heightened volatility and record-high yields in Japan’s super-long bond sector, which had raised concerns about the risk of failed auctions and broader market instability. The Finance Ministry’s decision to cut issuance more aggressively than initially planned was announced to primary dealers late last week, with officials emphasizing the need to calm trading and restore confidence in long-term debt markets. The changes are also complemented by the Bank of Japan’s recent indication that it will slow its withdrawal from bond purchases starting next fiscal year, further signaling coordinated efforts to support market stability.
While the reduction in super-long bond sales is expected to ease upward pressure on yields and avert the kind of volatility seen in recent months, the government has opted not to pursue immediate buybacks of previously issued bonds. Instead, the ministry will offset some of the decrease in long-term issuance by increasing the supply of shorter-term notes, such as 2-year bonds. Market strategists note that the success of these measures will depend on solid demand in upcoming auctions for 20- and 30-year bonds, as well as broader economic factors including inflation and fiscal policy ahead of a summer election.
“Your donation helps us cover global events, ensuring everyone stays informed.”
(Source: The Business Times | Bloomberg | Japan Times)
