The Bank of Japan's decision to set negative interest rates has doomed the government's program to sell bonds to retail investors.
The Ministry of Finance said it is canceling the planned sale of 10-year fixed-rate notes from Feb. 5 aimed at individual investors.
The government already halted sales of two-year retail notes in October 2014, saying buyers would have to pay more in broker fees than they would get in interest.
Yields on benchmark 10-year government bonds slid to a record 0.045 percent on Wednesday in Tokyo after the central bank announced Jan. 29 it will set a rate of minus 0.1 percent on a portion of excess reserves. Japan has about ¥12.8 trillion of retail notes outstanding, or about 1.2 percent of its total ¥998 trillion in debt, figures show.
"Investors are faced with diminishing returns and even may have to pay" to lend the government money, said Naoya Oshikubo, a rates strategist at Barclays PLC in Tokyo.
"The appeal of JGBs as an investment asset is further waning with the introduction of negative rates."
The yield on the government's benchmark 10-year note fell as much as 3.5 basis points on Wednesday.
Ten-year retail notes represent more than 70 percent of the retail securities outstanding.