Japan Cuts Super-Long Bond Sales by 10% to Stabilize Markets

Japan Cuts Super-Long Bond Sales by 10% to Stabilize Markets

In a rare and decisive step, the Japanese government has announced a 10% reduction in the issuance of super-long Japanese Government Bonds (JGBs) for the current fiscal year. The move marks a significant revision to its annual bond issuance plan, aiming to ease supply concerns that have roiled markets.

Weak Demand Triggers Policy Response

The decision follows weak investor participation in recent auctions and a notable surge in long-dated yields, which hit multi-year highs last month. The Ministry of Finance (MoF) cited a widening supply-demand mismatch as the key reason behind the revision.

📉 Super-long JGBs, including the 20-year and 30-year bonds, saw yields spike amid poor auction coverage, sparking volatility and raising borrowing costs.

Government Aims to Restore Market Confidence

By reducing bond supply, the government hopes to:

• Relieve upward pressure on long-term yields
• Improve auction outcomes
• Stabilize investor sentiment

This is expected to narrow the gap between supply and actual demand in the bond market, which has been under pressure from shifting monetary policy expectations and global rate movements.

📊 Related: BOJ Policy Outlook Remains Key to JGB Yield Direction

Total Issuance Also Adjusted Down

The MoF confirmed that the overall bond issuance volume for FY2025 will be revised downward to reflect the cut in super-long bond sales, though details on short- and medium-term issuance remain unchanged for now.

Conclusion

Japan's rare mid-fiscal bond program adjustment signals a proactive approach to financial stability. As bond markets continue to respond to macro shifts and central bank cues, investors will closely watch further developments in JGB supply dynamics and BOJ policy alignment.