Bond Programme Revision

The Japanese government is planning a rare revision of its bond programme to cut sales of super-long bonds by about 10% from the original plan. This adjustment is intended to address market concerns following weak demand at auctions and a recent rise in super-long yields.

This plan comes in light of the Bank of Japan’s recent decision to slow down the reduction of bond purchases from the next fiscal year. The revised issuance plan will be discussed with primary dealers at a meeting on Friday.

The recent update by the Japanese Ministry of Finance outlines a notable contraction in issuance of super-long JGBs for the next fiscal cycle. The 10% trim in 20- and 30-year instruments appears to mirror tepid appetite from market participants, reflected in less-than-encouraging auction results and climbing yields at the long end of the curve. These shifts are not merely technical adjustments; rather, they reflect broader shifts in domestic risk preference and external yield pressures, particularly with persistent speculation around policy normalisation from the monetary authority.

Shifts In Bond Markets

Cuts to supply at these tenors make it clear that authorities are attempting to stabilise the longer-duration segment. Reduced issuance in that segment should, in theory, anchor yields lower, or at least stem the pace of their ascent. Recent trading patterns suggest super-long maturities have lately been more sensitive to macro headlines, both domestic and global. That responsiveness, combined with higher volatility and waning investor participation, steered the ministry toward this recalibration.

And while reduction of longer maturity supply dominates the headlines, there’s an opposite motion underway at the front end. A steady increase in issuance of shorter-duration securities—two-year notes and treasury discount bills—is now firmly baked into the fiscal roadmap. There’s little ambiguity here: funding needs are not shrinking but being redistributed along the curve. That sort of rebalancing generally seeks to reduce the average duration of outstanding debt and adapt more flexibly to higher interest rate environments.

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