TOKYO – Japan’s Finance Ministry is considering expanding its lineup of government bonds available to individual investors, with experts pushing for new products such as inflation-linked bonds amid rising prices, its officials say.
Bond purchases by individual investors have been soaring as the Bank of Japan moves to raise interest rates. The ministry is also eager to diversify buyers of its debt given that the BOJ is reducing bond purchases as part of its monetary normalization following a decade of unorthodox easing.
During a meeting among experts on managing government bonds, some attendees called for offering super long-term bonds with 20- or 30-year maturities to individual investors.
Currently, there are three types of government bonds for individual investors in Japan.
One is the 10-year floating rate bond, whose applicable interest rate changes every six months in line with market interest rates. The two others are five-year fixed-rate bonds and three-year fixed-rate bonds, whose interest rates remain unchanged until maturity. The interest for these bonds is paid every six months, and the principal returned at maturity.
A ministry survey recently showed that the holdings of fixed five-year bonds have increased across all age groups. But the ministry wants to reach out more to relatively younger, working-age people under 30 as well as those in their 40s, according to a ministry official.
Regarding the proposed new products such as inflation-linked bonds, some at the ministry’s panel comprising representatives of financial institutions said such bonds would be suitable in the current inflationary environment. The amount of principal increases for bonds tied to inflation.
Others pointed out, though, it is difficult to define the inflation rate, according to a ministry official.
In fiscal 2025 ended March, Japanese government bond purchases by individuals rose 36.9 percent from the year earlier to 6.15 trillion yen ($38 billion), the highest since 2006.
Sales of fixed five-year bonds were particularly strong at 3.20 trillion yen, jumping 131.8 percent from the previous year, thanks to attractive interest rates, such as 1.66 percent in the March offering, which is much higher than the interest rate of regular savings at banks, the official said.
The ministry is also set to expand government bonds to non-individuals, starting from those issued in January 2027, with an eye to targeting organizations such as private schools and condominium management associations.