MoF’s Sumi announces plans for 40-year JGB
Japan is preparing to issue a 40-year bond towards the end of 2007, according to Chikahisa Sumi, director of the debt management policy division at the Ministry of Finance.
Speaking at Euromoney’s Japan Fixed-Income Forum in March, Sumi said: "The super-long sector of the JGB market was being traded quite actively at the end of 2006. We won’t go ahead with a 40-year bond no matter what, but we would like to test the market."
Reacting to international market sentiment is a priority for the MoF now that the domestic investor base for government debt is shrinking. Foreign holdings of Japanese government bonds account for only about 5% of the total, and Sumi conceded that withholding taxes and the relative paucity of issuance at longer maturities have been among the major limiting factors.
"Domestically we rely on the withholding tax," he said, "but we are aware that foreign investors don’t like it and we are taking steps to make it easier for them to invest in JGBs. Japanese bankers tend to act in the same way as each other, partly because they are all subject to the same regulations. We’d like to welcome to the market those who act differently, and we expect many of those people to be foreigners."
Encouraging further development in the secondary markets will be a further challenge.