Latest news with #yields
Japan Times
an hour ago
- Business
- Japan Times
Japan surprises with plan for bigger cut to superlong bond issuance
Japan is planning to cut the issuance of superlong bonds this year by more than earlier reported as it tries to restore calm to a market spooked by recent record highs in yields. The Finance Ministry proposed reducing the issuance of 20-, 30- and 40-year bonds by a total of ¥3.2 trillion ($22 billion) through the end of March 2026, according to a plan presented by the ministry during a meeting with primary dealers on Friday. The latest plan from the ministry showed a reduction to 20-year bond issuance that is twice the size suggested in draft documents, underscoring the level of concern among policymakers over rising borrowing costs. A poorly received auction of 20-year bonds by Japan last month rippled through global markets that are on edge over the risks posed by rising government debt levels. To compensate for the cuts in superlongs, the ministry is considering boosting the issuance of shorter-term debt, particularly six-month U.S. Treasury bills, the plan showed. The extra reduction for the 20-year bond issuance is "positive for the bond market,' said Mari Iwashita, executive rates strategist at Nomura Securities. "Still, whether the decline in liquidity and high volatility in superlong bonds will improve will depend on if there is solid demand in the upcoming 20- and 30-year bond auctions.' The yen curve flattened, led by a drop in long-end rates after the release of the updated plan. The planned revision to the ministry's bond issuance plan this year is the second move by policymakers this week to respond to an imbalance between supply and demand that has emerged in Japan's bond market. Earlier this week, the Bank of Japan said it would slow down its withdrawal from the market from next year in a move aimed at ensuring stability. The BOJ still has a massive footprint in Japan's bond market, with ownership of around half the nation's outstanding central government debt and would still be buying around ¥2.1 trillion of bonds per month in early 2027 under its new plan. Still, the void created by the smaller BOJ purchases is ruffling bond market dynamics as it hasn't been filled by renewed buying from private-sector banks and life insurers. That gap has fueled much of the choppy downward pressure on bond prices and pushed up yields. The problems are particularly acute in the superlong end of the market due partly to separate changes to regulations that have limited the appeal of those bonds for banks while reducing the need for life insurers to buy them. Growing concerns over Japan's fiscal trajectory and expanding deficits globally including in the U.S. are also feeding into reluctance to pick up debt of 20 years or more. "The ministry publicized its revised plan sooner than anticipated to ward off the risk of a failed 20-year bond auction on June 24 and to avert the market volatility seen in May,' said Shoki Omori, chief strategist at Mizuho Securities. "In light of these announcements, superlong-term auctions are poised to regain a measure of stability.' Under the latest plan, total issuance of 20-year bonds will decrease by ¥1.8 trillion to ¥10.2 trillion over the fiscal year. Meanwhile, the supply of 30- and 40-year bonds is expected to be reduced by ¥900 billion and ¥500 billion, respectively. The ministry is also planning to cut offerings in liquidity-enhancing auctions for 15.5- to 39-year maturities by ¥100 billion per auction. A Finance Ministry official briefing reporters Friday said that the plan will likely become officially approved on Monday or Tuesday. He added that the last time the bond issuance plan was changed during the fiscal year for a reason unrelated to budgets was in 2009. On buybacks, the official said that some market participants had asked for purchases of superlong bonds while others said buybacks would hurt the autonomy of the market. The ministry isn't working on implementing buybacks for now, and it's not something that can be implemented soon. Even if the planned adjustments go ahead, the Finance Ministry will still face the challenge of finding alternative investors to absorb the slack as the central bank continues its tapering. Japan remains heavily reliant on bond issuance to finance spending. Japan's projected debt-to-gross domestic product ratio of 232.7% this year is still the highest among developed economies, feeding into concerns about the nation's fiscal stability. About a quarter of the initial budget for fiscal 2025 was allocated to debt-servicing costs alone, underscoring the country's vulnerability to rising yields. The concerns have been fanned by policy measures floated by political parties ahead of a national election in July. Parties are preparing to unveil costly proposals aimed at securing voter support. The ruling Liberal Democratic Party is planning yet another round of cash handouts to households. The Democratic Party for the People, a key opposition force, has called for cutting the national sales tax to 5% across the board, a more expensive choice, with additional bond issuance floated as a possible funding source. Against this backdrop, investors are in need of reassurance that the balance of supply and demand in the JGB market will be restored without yields rocketing.
Japan Times
11 hours ago
- Business
- Japan Times
Rural bank plans its return to Japan bonds after winning on Nvidia
A regional bank that has stood out among its peers for making money on assets ranging from U.S. Treasuries to Nvidia is now looking closer to home for investments. Iyogin Holdings, which shunned Japanese government bonds during the era of negative interest rates, is ready to jump back in once a rise in yields runs its course, said Chief Executive Officer Kenji Miyoshi. Yields on Japan's sovereign debt have risen from rock-bottom levels as the return of inflation to the economy prompts the central bank to pare bond purchases and raise interest rates. That's led financial institutions to contemplate when to return to the nation's $7.9 trillion debt market after chasing higher returns abroad for years — a task that has been complicated by recent ructions, including a spike in long-term yields. Less than 10% of Iyogin's ¥1.8 trillion ($12 billion) securities portfolio is in Japanese sovereign debt. Once yields become attractive enough, JGBs could make up as much as half of its portfolio, Miyoshi said in an interview in the city of Matsuyama, Ehime Prefecture, about 800 kilometers southwest of Tokyo. Miyoshi said the 10-year JGB yield is likely to peak at around 2%, based on his assumption of the Bank of Japan's policy rate reaching 1.5%. "I think we can start buying at around 1.7% or 1.8%,' he said. The decision also depends on how lending, deposits and other components of the balance sheet will trend due to rising rates. Japan's 10-year yields are currently around 1.4%, and the BOJ this week kept its key overnight rate at 0.5%. Iyogin is already preparing for its return to the market. Miyoshi said the bank is now ready to use the same electronic platform for JGBs as the one it employs for stocks and foreign bonds, noting it allows trades to be executed more swiftly. That would differentiate it from bigger rivals in Japan, where government bond trading is often still done using old-style voice methods. Miyoshi also spoke about the potential for consolidation in Japan's regional banking industry, saying there are too many lenders in a country with a shrinking population. He expects a wave of mergers triggered by a growing sense of urgency among bank management. While Iyogin has no plans to pursue mergers now, Miyoshi doesn't want to be passive once moves toward combinations reach its home region of Shikoku — the smallest of Japan's four main islands — and neighboring Chugoku. "We want to play a central role in these regions,' he said from the bank's brand-new headquarters building. "For that, we have to build up financial and operational robustness.' Hefty trading gains from Treasuries and other foreign bonds helped Iyogin post record profits for a third straight year, making it an outlier in Japan's banking industry, where much larger firms suffered from wrong bets on interest rates. Iyogin Holdings CEO Kenji Miyoshi says once yields become attractive enough, Japanese government bonds could make up as much as half of its portfolio. | Bloomberg Nvidia added to the bank's successes. The value of Iyogin's investment in the U.S. chipmaker grew about 10 times since it bought a stake five years ago, when the yen was also stronger. The bank was able to lock in gains by selling some of its holdings in the year ended March. Miyoshi played down the bank's winning streak, saying it's simply a result of trying to minimize risks through diversification. The bank reduced some of its foreign bond holdings and other assets in anticipation of an increase in market uncertainty following the inauguration of the second Trump administration. In the process, its market securities-related profits more than doubled last fiscal year. Miyoshi said the bank made gains from Treasuries and other foreign bonds without currency hedges because it sold them when the yen was trending cheaper against the dollar. Japanese banks usually hedge their investments in assets abroad to guard against currency swings, but Iyogin held about ¥300 billion worth of unhedged foreign bonds as of March, in addition to ¥500 billion in those with such protection. When the Japanese currency moves higher against the dollar, the value of the unhedged bonds takes a hit in yen terms. At the same time, Miyoshi said that could be mitigated by a rise in dollar-based prices of these notes, since U.S. rates are likely to be lower in such a situation. He also said the bank's portfolio is made up of a mix of assets whose moves are designed to cancel each other out. Equities are part of that diversification. Iyogin is investing in individual U.S. and Japanese stocks and has room to add more exposure as it reduces ¥25 billion in what is known as strategic shareholdings, which are owned to cement business ties with corporate clients. Iyogin is a rarity in Japan's regional bank industry, where many of the nation's roughly 100 local lenders struggle with securities portfolio management because of a lack of expertise. The bank grooms its insiders to become market hands and doesn't hire mid-career outsiders. Still, Miyoshi, who spent years in Iyogin's markets team, said he is open to breaking with tradition by recruiting external talent. "We can sharpen our alertness to risks by taking in these people and their diverse views,' he said.
Bloomberg
15 hours ago
- Business
- Bloomberg
Rural Bank Plans Return to Japan Bonds After Winning on Nvidia
A Japanese regional bank that has stood out among its peers for making money on assets ranging from US Treasuries to Nvidia Corp. is now looking closer to home for investments. Iyogin Holdings Inc., which shunned Japanese government bonds during the era of negative interest rates, is ready to jump back in once a rise in yields runs its course, said Chief Executive Officer Kenji Miyoshi.
Bloomberg
2 days ago
- Science
- Bloomberg
Why Rice Is Poised to Survive Better in a Warming World
By In a warming world that's already affecting farming yields, one crop may be better positioned than others. New research looking at future production of six staple crops including wheat, soybeans and sorghum found that rice alone should have the smallest decline in global yields. The results present a sobering picture of how climate change may affect the global food system while also suggesting that there are actions farmers can take to offset some of the losses.
Japan Times
3 days ago
- Politics
- Japan Times
Farm ministry says farmers 'misunderstand' rice statistics
Rice farmers who say government data on yields is overstated actually misunderstand the rice crop situation index, the agriculture ministry said after announcing plans to cease publishing it — a declaration some experts say lacks accountability. 'The rice crop situation index isn't a representation of how big or how small the harvest is, but a lot of farmers think it is,' farm minister Shinjiro Koizumi said in a regular news conference Tuesday. The rice crop situation index — or the ratio of rice yield per 10 ares (1,000 square meters) to the average yield per 10 ares — shows the condition of the crop. For rice produced in 2024, for example, the crop situation index was in the same range as previous year's at 101, or 1% more rice than the average year, according to the agriculture ministry. Farmers misunderstand the index, and so instead of using it, we ask them to look at our studies on harvest levels when they want to make comparisons with the previous year, Koizumi said. His remarks came after he announced plans on Monday to cease publishing the ministry's rice crop situation index, which has been used for almost seven decades, as farmers and retailers voiced concerns that government data does not reflect reality. The ministry did not express interest in scrapping the rice crop situation index in an admission of what farmers say is faulty data, but rather explained that it contradicted farmers' testimonies regarding rice yields because the sampling numbers are outdated — trends from the past three decades, during which cold weather resulted in smaller yields, made the data inappropriate for comparison with current crops. Ministry officials not taking responsibility for the 'inaccurate' data and, instead, saying farmers are simply misunderstanding the index did not sit well with experts. 'The ministry is saying it's the farmers' fault — that they just got confused. But all that argument does is pass the buck,' said University of Tokyo professor Nobuhiro Suzuki, who specializes in agricultural economics. Suzuki said almost every rice farmer he has visited across Japan estimated that their rice paddies had a rice crop index of 90, or 10% less than the average yield. 'The truth is that the ministry doesn't know the accurate amount of harvest. The ministry's yield (data) was larger than what farmers were experiencing first-hand,' Suzuki said. Since replacing his predecessor, who stepped down over a gaffe related to rice four weeks ago, Koizumi has repeatedly said rice prices had surged since last summer due to a sharp drop in shipments made to JA and other distributors despite higher production. Farmers produced 6.79 million tons of rice last year, up 180,000 tons from the previous year, according to the farm ministry. In 2025, they are projected to yield 7.19 million tons of rice, which would make the harvest 400,000 tons higher compared with last year's and make it the largest in five years, the ministry said. Koizumi says that while there is a 'shortage-like feeling,' Japan isn't short on rice — an unconvincing explanation for some. 'The government is saying that JA is withholding the rice and jacking up prices, but that's all lies. Rice prices skyrocketed not because the supply chain is in disarray. The supply chain is in disarray because there isn't enough rice,' said Suzuki. The average price of a 5-kilogram bag at supermarkets in the week through June 8 was ¥4,176, down ¥48 from the previous week — the third consecutive weekly decline, according to agriculture ministry data released Monday. That figure didn't include data from stockpiled rice sold through no-bid contracts, which went for ¥2,119 per bag and made up over 50% of sales at supermarkets and convenience stores.
