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Japan Considers Green Transition Bonds Issuance for Next Fiscal Year

Japan Considers Green Transition Bonds Issuance for Next Fiscal Year

Japan’s Ministry of Finance is considering issuing green transition bonds in the second half of next fiscal year from April, as part of plans to push climate change efforts, a top official said on Wednesday.

Japan plans to issue 1.6 trillion yen of such bonds in the fiscal year that ends April 2024, with an eye on those with maturity of 10 years and 20 years.

“It takes time for preparations for obtaining certification, ascertaining investor needs, and determining duration and other consideration, I think the timing for issuance will be in the latter half of next fiscal year,” Michio Saito, financial bureaus chief at the Ministry of Finance, told TV Tokyo.

The rare media appearance by a top bureaucrat comes amid growing public interest in the issue of debt management.

Saito said his ministry is seeking to extend the duration of government bond (JGB)holdings to correct heavy issuance of short-term JGBs issued to fund COVID-19 relief measures since 2020.

See related article: Osaka Gas USA, Tallgrass & Green Plains Partner to Advance Japan’s Climate Objectives

“It will be like hand-to-mouth operations if we rely too much on short term government bonds,” Saito said. The average duration of government bond issuance estimated for next fiscal year is eight years and one month, six months shorter that the current fiscal year.

Saito said his ministry has no preset expectations on the future of interest rates or the economy.

“We will need to respond if the market situation changes dramatically over investor demands such as durations and zones,” Saito said. “We will appropriately conduct debt management, which centres on ascertaining market needs and allocate issuance by duration.”

Saito also said interest rates remain low but the current situation will not last indefinitely, as seen in spikes in overseas bond market yields.

Saito, who heads the ministry’s division charged with issuing Japanese government bonds (JGBs), is also known as “Mr. JGB” for his expertise in the market, having engaged in overhauling the market system around 2000 when the government heavily sold JGBs to the market.

Source: Reuters


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