TOKYO: Japan is considering buying back some super-long government bonds issued in the past at low interest rates, two sources with direct knowledge of the plan said on Monday, underscoring its focus on reining in any abrupt rise in bond yields.

The move would come on top of an expected government plan to trim issuance of super-long bonds — such as those with 20-, 30- or 40-year maturities — in the wake of sharp rises in their yields.

The Ministry of Finance, which oversees the government’s debt issuance plan, will reach a final decision after holding meetings with bond market participants on June 20 and June 23, the sources said.

Buying back super-long Japanese government bonds (JGB) would require budget approval and will likely take time, they said.

Yields on super-long JGBs rose to record levels last month due to dwindling demand from traditional buyers such as life insurers, and global market jitters over steadily rising debt levels.

In Japan, super-long bonds were also sold off as Prime Minister Shigeru Ishiba faced political pressure for tax cuts and big spending ahead of an upper house poll in July, policies that could add to the country’s already huge public debt.

The JGB market distortion has turned investors’ attention to whether the MOF, which oversees debt issuance, and Bank of Japan could take measures to tame rises in super-long yields.

Sources have told Reuters the BOJ will likely maintain its current bond-taper programme running through March, but consider slowing the pace of tapering from next fiscal year. 

Reuters