Tokyo: Japan is considering buying back a portion of its previously issued super-long government bonds, which were sold at low interest rates, according to two sources familiar with the matter. The move reflects growing concern over recent sharp rises in long-term bond yields and aims to stabilize the market while managing the country’s ballooning debt profile.
The proposed buybacks would be in addition to an expected reduction in the issuance of new super-long bonds, including those with 20-, 30-, and 40-year maturities. The idea, officials say, is to ease concerns over oversupply and to dampen further upward pressure on yields.
Last month, yields on super-long Japanese government bonds (JGBs) surged to record highs amid weakening demand from major institutional buyers such as life insurers, combined with global concerns about rising sovereign debt levels. On May 21, the 30-year JGB yield spiked to 3.185%, marking a significant milestone in Japan’s fixed-income markets.
Political pressures have also contributed to the market turbulence. Ahead of the July upper house election, Prime Minister Shigeru Ishiba has been under increasing pressure to implement tax cuts and increase fiscal spending—moves that could exacerbate Japan’s already massive public debt burden.
Market sentiment responded positively to the potential buybacks. Following the news, yields on JGBs eased as investors anticipated government action to address the oversupply issue. The yield on the benchmark 10-year note fell by 0.5 basis points to 1.45% as of 08:36 GMT, while the 30-year yield, which had risen by as much as 4.5 basis points earlier in the day, pared gains to close 1.5 basis points higher at 2.89%.
Of the planned 172.3 trillion yen ($1.2 trillion) in JGB sales scheduled for the current fiscal year through March, over 24 trillion yen is set to come from super-long bond issuances.
The Ministry of Finance (MOF), responsible for managing the nation’s debt, is expected to finalize its decision on the buybacks following consultations with bond market participants on June 20 and June 23. The sources noted that any buyback program would require budget approval and would likely take some time to implement.
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“Reducing new issuance of super-long JGBs alone probably won’t fix the problem of over-supply, so this would be a move in the right direction,” said Mari Iwashita, executive rates strategist at Nomura Securities.
The ongoing volatility in JGB yields has also brought attention to potential responses from the Bank of Japan (BOJ). Sources told Reuters that the BOJ is likely to maintain its current bond tapering strategy through March, though it may consider slowing the pace of tapering starting next fiscal year. A final decision is expected at the BOJ’s policy meeting on June 16–17.
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BOJ Governor Kazuo Ueda has emphasized the importance of monitoring the impact of large fluctuations in super-long bond yields, warning that such movements could affect short-term borrowing costs and, by extension, the broader economy.
Japan’s experience is part of a wider global trend. Yields on long-duration government bonds have surged in other major economies as well, notably in the United States, where a credit downgrade by Moody’s and policy shifts such as former President Donald Trump’s tax cuts have led investors to demand higher returns.
