Japanese savers go on record government bond spree

{"text":[[{"start":6.7,"text":"A buying spree of government bonds by Japan’s household investors has raised the prospect of a historic shift in one of the world’s biggest and most conservative stashes of bank deposits."}],[{"start":17.1,"text":"The unprecedented purchases of five-year Japanese government bonds issued to “Mrs Watanabe” retail investors came as the Bank of Japan last month declared that its multi-decade war against deflation was finally won — locking in expectations among Japanese savers that rising prices were now a permanent fixture."}],[{"start":35.4,"text":"The Japanese hold a $7tn hoard of cash, mostly in bank accounts paying little interest. That habit has long held the potential for huge upheaval for banks and the broader JGB market if that practice were ever to change significantly."}],[{"start":49.28,"text":"The possibility that such a change may have started was raised by record November purchases of so-called retail JGBs — a category of three-, five- and 10-year government notes sold to the public in ¥10,000 ($63) tranches, analysts said."}],[{"start":64.44,"text":"It comes as the Japanese economy normalises after decades of deflation, ultra-loose monetary policy and households letting cash sit in accounts yielding almost zero returns."}],[{"start":null,"text":"

"}],[{"start":75.3,"text":"Retail JGBs were initially popular after being launched in 2003, before losing their shine during the Bank of Japan’s long era of ultra-low rates. Purchases have been rising steadily over the past year to a monthly rate of about ¥1tn since July."}],[{"start":90.78,"text":"Issuance of retail JGBs for November, which reflects orders placed in late October, doubled from the previous month to ¥2.03tn ($12.6bn) as offered rates on the three- and five-year notes both rose above 2 per cent for the first time."}],[{"start":107.02,"text":"Issuance is running at more than twice the finance ministry’s projection of ¥5.9tn for the year to March, said analysts at Société Générale. Even under a conservative scenario, issuance could be revised up to ¥13tn next year, they added."}],[{"start":122.54,"text":"Analysts at Morgan Stanley UFJ said that, if yields remain around their current levels, household holdings of retail JGBs could reach ¥50tn by 2030, compared with about ¥20tn now. Retail JGBs represent less than 2 per cent of the total JGB market."}],[{"start":null,"text":""}],[{"start":138.46,"text":"Stephen Spratt, a fixed-income strategist at Société Générale, said this new level of buying would be a “very big historic shift” if sustained."}],[{"start":148.8,"text":"“The Japanese government has long wanted to push more retail money into JGBs, and to create a category of stable holders on a bigger scale,” he said. “We think that a lot of the money that is being put into retail JGBs is cash being rotated out of bank deposits and into this higher-yielding asset.”"}],[{"start":167.9,"text":"Spratt said the recent surge in retail JGB buying came at an opportune moment for the government, which plans to cut consumption tax on food from 8 per cent to 1 per cent for two years from April 2027."}],[{"start":180.7,"text":"The loss of tax revenue from the move is projected to cost the government about ¥10tn over two years — a sum that could be covered by sustained buying of retail JGBs, he said."}],[{"start":191.46,"text":"About two-thirds of the latest burst of retail JGB buying was focused on the five-year fixed-rate note, which offered a yield of 2.39 per cent."}],[{"start":199.96,"text":"The finance ministry has heavily advertised the bonds, stressing the guarantee on the principal and the safety of government-issued debt. However, Japanese banks are reluctant to promote the JGBs to customers as they represent fierce competition with traditional term deposits."}],[{"start":215.82,"text":"Analysts said that the BoJ’s October declaration that underlying inflation in Japan had hit its 2 per cent target had convinced many households that the policy rate would probably not go much higher."}],[{"start":226.94,"text":"Many economists expect the BoJ to raise rates to 1.5 per cent in December, followed by two more increases next year to peak at 2 per cent."}],[{"start":238.51,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794376519_9602.mp3"}