Japan is looking for new buyers of government bonds, residents are the target

JAKARTA - The Japanese government has begun expanding the country's bond market by targeting individual investors. This step is being taken amid increasing public interest in buying government debt, as well as when the Bank of Japan reduces bond purchases as part of its monetary policy changes.

Kyodo News, quoted Sunday, June 28, reported that the Japanese Ministry of Finance is studying the addition of bond options for individual investors, including bonds associated with inflation. The new product is considered to be able to attract more people to invest as prices continue to rise.

In Japan, bank savings interest rates are still relatively low compared to the yields of several government bond series. This condition also encourages people's interest to shift funds to investment instruments that are considered more attractive.

The change in policy by the Bank of Japan is also an important factor. After years of buying large amounts of bonds to support the economy, the central bank is now beginning to reduce its purchases as monetary policy normalizes. This condition makes the government need to expand the buyer base of state debt securities.

In a meeting of experts on government bond management, a proposal emerged that super-long bonds with a tenor of 20 years and 30 years would also be offered to individual investors. Tenor is the period until the bond matures.

Currently, Japan has three types of bonds for individual investors. First, 10-year bonds with floating interest rates that are adjusted every six months according to market interest rates. The other two are fixed-interest bonds with tenors of five and three years. The interest is unchanged until maturity. Interest payments are made every six months, while the investment principal is returned at maturity.

The latest survey by the Japanese Ministry of Finance shows that the ownership of five-year fixed-rate bonds increases across all age groups. However, the government wants to expand the reach to investors of productive age, especially those under 30 years old and the 40s age group.

Bond products associated with inflation also received support from some members of the panel who came from financial institutions. In this type of bond, the principal value of the investment increases in line with inflation so that the investor's purchasing power is better maintained.

However, not all parties agree. Some panel members consider determining the inflation rate as a reference for bonds is not a simple matter because it can be different from the increase in prices felt by the community on a daily basis.

According to Kyodo News, the purchase of Japanese government bonds by individual investors in the fiscal year 2025 ending March jumped 36.9 percent from the previous year to 6.15 trillion yen or about 38 billion US dollars. The figure is the highest since 2006.

Sales of five-year fixed-rate bonds accounted for the largest contributor with a value of 3.20 trillion yen, up 131.8 percent from the previous year. One of the drivers was the interest rate, which reached 1.66 percent in the March offering, well above the usual savings interest at banks.

Starting January 2027, the Japanese Ministry of Finance will also expand the sale of bonds to non-individual buyers. The target includes private schools and condominium management associations.