Exclusive-Japan to consider trimming super-long bond issuance, sources say

By Takaya Yamaguchi

TOKYO (Reuters) -Japan will consider trimming issuance of super-long bonds in the wake of recent sharp rises in yields for the notes, two sources told Reuters on Tuesday, as policymakers seek to soothe market concerns over worsening government finances.

The Ministry of Finance (MOF) will consider tweaking the composition of its bond programme for the current fiscal year, which could involve cuts to its super-long bond issuance, said the sources who had direct knowledge of the plan.

The MOF will make a decision after holding discussions with market participants around mid- to late-June, the sources said.

The plan comes amid recent rises in super-long bond yields to record levels, due largely to dwindling demand from traditional buyers like life insurers.

The yield on the 30-year Japanese government bond (JGB) fell 12.5 basis points to 2.91% after the report, while the benchmark 10-year yield dropped 5 points to 1.455%.

"We've been arguing that something had to give to correct the supply-demand imbalance in long-end JGBs. The market is thinking it will be the MOF," Societe Generale said in a note.

If the MOF were to reduce issuance of 20-, 30- or 40-year JGBs, it would likely increase issuance of shorter-dated debt instead, the sources said.

As such, the total planned size of JGB issuance for the current fiscal year that ends March 2026 will remain unchanged from 172.3 trillion yen ($1.21 trillion), they said.

($1 = 142.4000 yen)

(Reporting by Takaya Yamaguchi; Writing by Leika Kihara; Editing by Chang-Ran Kim and Sam Holmes)

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