There is a virtual consensus in the marketplace that another increase in government bond issues is inevitable.

Although many market participants are well aware of this situation, the problem is that they are not particularly concerned about the changing forces of supply and demand.

Apparently expecting to issue more bonds in the coming years, the Finance Ministry has been unofficially studying what their impact would be.

If the reassessment of the underwriting system for government bonds does not lead to more effective absorption of the bonds, the ministry may need to look for other buyers.

The failure of U.S. energy giant Enron Corp. early this month has cut deeply into the principal capital of some money management funds in Japan.

Ironically, however, the deterioration of MMF principals and fears about the impending removal of full protection on bank deposits come April 1 have fueled speculation that investors will switch to safe havens like Japanese government bonds.

Now that the Finance Ministry appears resigned to more bond issues, the Financial Services Agency itself seems poised to allow the intermediary function of banks in the financial market to diminish. In other words, the ministry expects to see financial institutions opt for risk-free assets.

If an increase in the outstanding balance of state bond issues becomes imminent, the ministry will have to promote sales of such bonds to individual investors as alternatives to time deposits and savings accounts.

Even if principal and interest returns on government bonds are assured, the impact of the recent downgrades of the nation's sovereign debt rating cannot be overlooked.

Leading European and U.S. investors no longer see Japanese government bonds as bona fide portfolio components, and this trend is likely to accelerate, given indications that further downgrades of Japanese government bond ratings are impending.

Although the Japanese people, who hold about 95 percent of the government's total bond issues, harbor many differing views, the opinions of some minority holders, like foreign institutional investors and brokerage firms, often prove more accurate.