Finance Minister Taro Aso indicated a new openness to introducing 50-year government bonds, days after the country’s central bank chief suggested such a move could be helpful.
“This is one topic of our considerations,” Aso told reporters Friday in Tokyo when asked about the potential for a bond spanning half a century. Any such issuance will not come soon, Aso cautioned, while recognizing that there could be demand for it given investors’ search for better returns.
Japan’s sovereign debt market accounts for the lion’s share of the world’s negative-yielding bonds, and the country’s institutional investors have been pushed into riskier assets — including foreign securities. That has spurred the Bank of Japan and the Financial Services Agency to strengthen monitoring of dangers in the financial system.
BOJ Gov. Haruhiko Kuroda on Tuesday said issuance of 40-year or 50-year debt by the government would be meaningful to help prevent super-long-term yields from being excessively low.
Aso’s comments mark a sharp turnaround.
The Ministry of Finance told reporters and bond-market participants as recently as September that 50-year bonds were not on the table for discussion. Aso himself shot down the idea in 2016.
The ministry is now putting finishing touches on its borrowing plans for 2020, with the government assembling both its annual budget and a potential supplementary package. But given Aso’s caution on timing, it may be too soon for bond buyers to prepare for a new longest bond in Japan.
The longest-maturity security from Japan currently is 40-year bonds. Developed-nation peers including France and the U.K. have half-century bonds, while a 30-year bond is the longest available in U.S. Treasurys.