Japan plans to issue a record 149.7 trillion yen ($1.9 trillion) of government bonds (JGBs) through regular auctions in the fiscal year from next April, the Ministry of Finance said on Saturday, as the country struggles to reduce its budget deficit.
The ministry will raise the monthly issuance of 10- and 20-year bonds in the next fiscal year from April and will look into resuming issuing inflation-linked bonds as it seeks to diversify its funding methods. The plan is mostly in line with market expectations and what sources told Reuters earlier this week. The total amount of bonds to be offered through auction is 4.9 trillion yen greater than the latest plan for the current fiscal year.
Analysts think the market will have little problem absorbing the increased debt sales, as many domestic investors are happy to gobble up JGBs given the lack of investment alternatives in the stagnant economy. Foreign investors hold only 8.2 percent of Japan's debt, compared with 45.3 percent for US Treasuries, even after they bought Japanese debt aggressively in July-September to escape euro zone bonds.
Yet the sovereign debt crisis in Europe is making many investors nervous as Japan's public debt, already by far the biggest among the industrialised countries relative to the size of the economy, keeps ballooning. As Japan's population declines and grows older, domestic investors' appetite for bonds may eventually wane, while the government has yet to devise a credible plan to curtail its debt. Below is the finance ministry's breakdown of debt to be sold through regular auction, by maturity and number of auctions per year. Numbers in brackets are for fiscal 2011/12.