Japan Implements New Debt Measures as BOJ Tapers Bond Purchases

Japan's Finance Minister Katsunobu Kato outlined the government's commitment to prudent debt management amid the Bank of Japan's tapering of bond purchases, emphasizing the importance of maintaining investor confidence and market stability. To diversify and expand the investor base for Japanese government bonds (JGBs), the government plans to introduce new financial instruments such as floating-rate notes linked to short-term interest rates and enable unlisted companies to invest in bonds designed for retail investors. In response to rising yields, the government is considering buying back some super-long-term bonds issued at low interest rates and reducing the issuance of such long-dated debt to stabilize demand. These measures have begun to calm the JGB market, with yields paring earlier gains following reports of the buyback plan, suggesting a built-in stabilization system that supports market confidence. The evolving bond strategy reflects Japan's efforts to balance fiscal sustainability with market flexibility as global interest rates rise and monetary policy shifts. Increasing domestic ownership of JGBs is viewed as a key factor in maintaining robust demand and financial resilience in this new environment.