WHAT'S NEW

JAPANESE GOVERNMENT BONDS‌‌‌‌‌‌‌‌‌‌‌ Monthly Newsletter of the Ministry of Finance, Japan

This Month's Special!

What's New ⇒ 1 JGB Issuance Plan for FY2017

2 FY2017 Budget and Tax Reform

Monthly Topic ⇒ 1 Revision of Japanese National Accounts (JSNA)

2 Breakdown by JGBs (including T-Bills) Holders (end of Sep.2016)

Jan. 2017

Contents

  1. What's New Monthly Topic IR Special Office

    …P.1

    WHAT'S NEW

    1. JGB Issuance Plan for FY2017

    The Ministry of Finance formulated the JGB Issuance Plan for FY2017 on December 22, 2016. The details of the issuance plan are as follows:

    ＜Breakdown by Legal Grounds＞

    (Unit: billion yen)

    ＜Breakdown by Financing Methods＞ (Unit: billion yen)

    FY2016

    (Initial)

    (a)

    FY2016

    (3ｒｄ Supplementary Budget)

    FY2017

    (Initial)

    (b)

    (b)－(a)

    (c)

    (c)－(a)

    (c)－(b)

    JGB Market Issuance (Calendar Base)

    147,000.0

    147,000.0

    －

    141,200.0

    -5,800.0

    -5,800.0

    Non-Price Competitive Auction II

    5,620.0

    8,699.4

    3,079.4

    7,462.0

    1,842.0

    -1,237.4

    Adjustment between fiscal years

    -417.2

    2,900.5

    3,317.7

    -698.7

    -281.5

    -3,599.1

    Subtotal Financed in the Market

    152,202.8

    158,599.9

    6,397.0

    147,963.3

    -4,239.5

    -10,636.5

    Nonmarketable JGBs for Retail Investors

    1,900.0

    3,150.0

    1,250.0

    2,950.0

    1,050.0

    -200.0

    OTC Sales for Households

    100.0

    50.0

    -50.0

    50.0

    -50.0

    －

    Subtotal for Households

    2,000.0

    3,200.0

    1,200.0

    3,000.0

    1,000.0

    -200.0

    BOJ Rollover

    8,000.0

    8,000.0

    －

    3,000.0

    -5,000.0

    -5,000.0

    Total

    162,202.8

    169,799.9

    7,597.0

    153,963.3

    -8,239.5

    -15,836.5

    ・The capacity for the buy-back operations is up to approximately 1 trillion yen in FY2017. Details of the buy-back operations will be determined by taking market conditions into consideration, based on a discussion with market participants.

    ・The maximum amount of front-loading issuance of Refunding Bonds in FY2017 is 56 trillion yen.

    （ Note1） Figures may not sum up to total because of rounding.

    （ Note2） "JGB Market Issuance (Calendar Base)" refers to JGBs issued by scheduled auctions from April to next March.

    （ Note3）Non-price competitive auction II is an auction carried out after the price-competitive auction, etc. The price offered is equal to the weighted average accepted price in the price-competitive auction, etc. Only the JGB Market Special Participants are eligible to bid in this auction (The amount assignable to each Market Special Participant does not exceed 15% of the amount awarded to it in the price-competitive auction, etc.).

    The figure in the non-price competitive auction II in the FY 2017 is calculated by multiplying the figure of the JGB Market Issuance （ 40-Year, 30-Year, 20-Year, 10-Year, 5-Year, 2-Year Bonds and Inflation-Indexed Bonds) by 7%.

    （ Note4） "Adjustment between fiscal years" refers to leveling-off of issuance amount between fiscal years through front-loading issuance and deferred issuance in the accounting adjustment term.

  2. JGB Primary Market

    …P.5

    FY2016

    (Initial)

    (a)

    FY2016

    (3ｒd Supplementary Budget)

    FY2017

    (Initial)

    (b)

    (b)－(a)

    (c)

    (c)－(a)

    (c)－(b)

    Newly-issued bonds

    34,432.0

    39,034.6

    4,602.6

    34,369.8

    -62.2

    -4,664.8

    Construction Bonds

    6,050.0

    8,901.4

    2,851.4

    6,097.0

    47.0

    -2,804.4

    Special Deficit-Financing Bonds

    28,382.0

    30,133.2

    1,751.2

    28,272.8

    -109.2

    -1,860.4

    Reconstruction Bonds

    2,156.4

    1,903.7

    -252.7

    1,514.5

    -641.9

    -389.2

    FILP Bonds

    16,500.0

    19,600.0

    3,100.0

    12,000.0

    -4,500.0

    -7,600.0

    Refunding Bonds

    109,114.4

    109,261.6

    147.1

    106,079.0

    -3,035.4

    -3,182.5

    For matured Reconstruction Bonds

    83.2

    －

    -83.2

    1,911.8

    1,828.6

    1,911.8

    Total

    162,202.8

    169,799.9

    7,597.0

    153,963.3

    -8,239.5

    -15,836.5

  3. The Auctions for Enhanced-Liquidity and JGB Buy-Back

    …P.6

  4. JGB Secondary Market

    …P.7

  5. Investor Trends and JGB Outstanding

    …P.9

  6. Economic and Financial Trends

    …P.13

  7. Information

…P.14

The Ministry of Finance

www.mof.go. jp

WHAT'S NEW

〈Main Points in FY2017〉

  • The calendar-based issuance to the market for FY2017 is to be reduced by 5.8 trillion yen (from FY 2016 initial JGB Issuance Plan), mainly based on the decrease in the total issuance of JGBs by 8.2 trillion yen (from FY 2016 initial JGB Issuance Plan).

  • Maturity structure is designed to reflect investor demands appropriately, so that the current low interest rate situation should be utilized smoothly and effectively.

    • Super long-term (over 10 years)：Effectively increased, combining normal auctions and "Auctions for Enhanced-Liquidity"

      • Decrease in 20-year (-1.2 trillion yen), increase in 40-year(+0.6 trillion yen)

      • Increase in Auctions for Enhanced-Liquidity for Super long-term(+1.2 trillion yen)

    • Long-term(10-year JGBs)：Decreased, reflecting weakened demand in a low interest rate environment(- 1.2 trillion yen)

    • Short- to Medium-term(5, 2-year JGBs and 1-year TBs)：Importantly decreased, based on

      diminished demand under negative interest rate situation(- 4.8 trillion yen)

  • The amount of Auctions for Enhanced-Liquidity is to be increased in remaining maturity zones where strong market demands for improved liquidity exist.

    • 0.6 trillion yen is to be added to 5-15.5 year zone and 15.5-39 year zone, respectively (+1.2 trillion yen in total).

＜Market Issuance Plan by JGB Types＞

(Unit: trillion yen)

FY2016 (Initial)

(per time)

(total ; a )

FY2016 (Revised in September)

FY2017 (Initial)

(per time)

(total ; b )

(b)－(a)

(per time)

(total ; c)

(c)－(a)

(c)－(b)

40-Year

0.4

×

6 times

2.4

0.4

0.5

×

×

2 times

4 times

2.8

0.4

0.5

×

6 times

3.0

0.6

0.2

30-Year

0.8

×

12 times

9.6

0.8

×

12 times

9.6

─

0.8

×

12 times

9.6

─

─

20-Year

1.1

×

12 times

13.2

1.1

×

12 times

13.2

─

1.0

×

12 times

12.0

-1.2

-1.2

10-Year

2.4

×

12 times

28.8

2.4

×

12 times

28.8

─

2.3

×

12 times

27.6

-1.2

-1.2

5-Year

2.4

×

12 times

28.8

2.4

×

12 times

28.8

─

2.2

×

12 times

26.4

-2.4

-2.4

2-Year

2.3

×

12 times

27.6

2.3

×

12 times

27.6

─

2.2

×

12 times

26.4

-1.2

-1.2

TBs (1-Year)

2.0

2.1

×

×

2 times

10 times

25.0

2.0

2.1

×

×

2 times

10 times

25.0

─

1.9

2.0

×

×

2 times

10 times

23.8

-1.2

-1.2

10-Year

Inflation-Indexed

0.5

×

4 times

2.0

0.4

×

4 times

1.6

-0.4

0.4

×

4 times

1.6

-0.4

─

Auctions for

Enhanced-Liquidity

9.6

9.6

─

10.8

1.2

1.2

Total

147.0

147.0

─

141.2

-5.8

-5.8

FY2016

(Estimates)

FY2017 (Initial)

Compared to FY2016

15.5-39 Year

2.4

3.0

0.6

5-15.5 Year

6.0

6.6

0.6

1-5 Year

1.2

1.2

─

（Note1） 40-Year Bonds will be issued in May, July, September, November, January and March. of Auctions for Enhanced-Liquidity>

（Note2） The total issuance of T-Bills (Treasury Bills + Financing Bills ) is to be 2.3 trillion yen per issue.

（Note3） 10-Year Inflation-Indexed Bonds (JGBis) will be issued in Ａｐｒｉｌ, August, October and February. The issuance amount of 10-Year Inflation-Indexed Bonds may be adjusted in a flexible manner in response to market environment and investor demands, based on discussion with market participants.

（Note4） Details of Auctions for Enhanced-Liquidity such as the allocation of issuance amount for each zone may be adjusted in a flexible manner in response to market environment and investor demands, based on discussion with market participants.

For more details, see; http://www.mof.go.jp/english/jgbs/debt_management/plan/e121222.html

2. FY2017 Budget and Tax Reform

On December 22, 2016, the Cabinet decided the draft FY2017 Budget with intent to continuously pursue both economic revitalization and fiscal consolidation.

For more details, see; http://www.mof.go.jp/english/budget/budget/index.html

The Cabinet also decided the FY2017 Tax Reform plan to increase Japan's growth potential, encourage wage hikes and enhance capital investment. This reform plan includes expansion of the tax exemption scheme concerning cross-border Repo Transactions (Bond Gensaki Transactions). We will explain this scheme in the coming newsletter.

MONTHLY TOPIC‌
  1. Revision of Japanese National Accounts (JSNA)

    The second preliminary GDP estimate (Jul - Sep 2016) was released on Dec 8, 2016. Real GDP expanded by 0.3% (annual rate 1.3%) from the previous quarter.

    The revised Japanese National Accounts (JSNA),

    which incorporates the latest international standard

    540

    on the System of National Account (SNA), is

    530

    implemented in this second estimate. Modifications

    520

    to JSNA include treating expenditures on research

    510

    and development (R&D) as gross fixed capital

    500

    formation, instead of intermediate consumption.

    490

    (trillion yen)

    Nominal GDP changes due to JSNA revision

    The JSNA revision led to a 31.6 trillion yen increase in FY2015 nominal GDP.

    Development of Real GDP

    After JSNA revision

    480 Before JSNA revision

    470

    460

    1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 (FY)

    2.0

    1.5

    (Quarterly, seasonally adjusted series)

    (％) Contributions to change from the previous quarter (Seasonally adjusted)

    1.5

    20

    15

    20

    16

    2016

    7～9

    10～12

    1～3

    4～6

    7～9

    7～9

    Gross Domestic Product

    0.2

    -0.4

    0.7

    0.5

    0.3

    ***

    1.3

    Domestic Demand

    0.3

    -0.5

    0.3

    0.5

    -0.0

    ***

    -0.0

    (0.3)

    (-0.5)

    (0.3)

    (0.5)

    ***

    (-0.0)

    ***

    Private Demand

    0.3

    -0.7

    0.1

    0.9

    -0.1

    (-0.1)

    -0.4

    Private Consumption

    0.5

    -0.7

    0.4

    0.2

    0.3

    (0.2)

    1.3

    Consumption of Households

    0.5

    -0.8

    0.4

    0.2

    0.3

    (0.2)

    1.3

    Excluding imputed Rent

    0.6

    -1.0

    0.4

    0.2

    0.3

    (0.1)

    1.3

    Private Residential Investment

    1.8

    -1.2

    1.3

    3.5

    2.6

    (0.1)

    10.9

    Private Non-Resi. Investment

    0.6

    0.4

    -0.3

    1.4

    -0.4

    (-0.1)

    -1.4

    Change in Private Inventory

    (-0.2)

    (-0.1)

    (-0.1)

    (0.2)

    ***

    (-0.3)

    ***

    Public Demand

    0.2

    0.0

    1.0

    -0.6

    0.3

    (0.1)

    1.0

    Government Consumption

    0.4

    0.7

    1.3

    -1.1

    0.3

    (0.1)

    1.2

    Public Investment

    -0.5

    -2.8

    -0.7

    1.6

    0.1

    (0.0)

    0.3

    Change in Public Inventory

    (-0.0)

    (0.0)

    (0.0)

    (-0.0)

    ***

    (-0.0)

    ***

    Net

    Expo

    rts of Goods & Services

    (-0.1)

    (0.1)

    (0.4)

    (-0.1)

    ***

    (0.3)

    ***

    (％)

    Source: Cabinet Office, Government of Japan

    Note1

    Note2

    1.0

    0.5

    0.0

    -0.5

    -1.0

    -1.5

    1.1

    0.1

    -0.4 -0.4

    1.2 1.1

    0.6

    -0.2

    1.2

    -1.8

    0.5

    -0.2

    -0.1

    0.2

    0.7 0.5

    -0.4

    0.3

    -2.0

    -2.5

    -3.0

    -3.5

    Private Demand Public Demand Foreign Demand Real GDP

    Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ

    2012 2013 2014 2015 2016

    Source: Cabinet Office, Government of Japan

    Note1: Change from the previous quarter (seasonally adjusted) Note2: Annual rate

    Note3: The Figures in () indicate contributions to Changes in GDP. Source: Cabinet Office, Government of Japan

    For more details, see; http://www.esri.cao.go.jp/en/sna/data/sokuhou/files/2016/toukei_2016.html

  2. Breakdown by JGBs (including T-Bills) Holders (end of Sep.2016)

    On December 19, 2016, the Bank of Japan (BOJ) released the Flow of Funds Accounts of the 3rd Quarter 2016. The shares of JGB (including T-Bills, hereinafter referred to as "JGBs") holders were updated as follows:

    • The total amount of JGBs outstanding decreased by 14.4 trillion yen to 1,091.0 trillion yen.

    • BOJ increased its holdings of JGBs by 15.8 trillion yen to 413.5 trillion yen.

    • Foreign Investors' holdings of JGBs increased by 1.4 trillion yen to 111.9 trillion yen.

（The end of Jun. 2016） （The end of Sep. 2016）

(Preliminary)

Pension Funds 34.3

3.1%

Public Pensions 52.7

4.8%

Foreigners 110.5

10.0%

Households 14.0

1.3%

Others 10.6

1.0%

General Government

(ex Public Pensions) 2.5

0.2%

BOJ 397.7

36.0%

Fiscal Loan Fund 0.0

0.0%

Pension Funds 33.0

3.0%

Public Pensions 51.0

4.7%

Foreigners 111.9

10.3%

Households 13.3

1.2%

Others 10.1

0.9%

General Government (ex Public Pensions) 2.4

0.2% Fiscal Loan Fund 0.0

0.0%

BOJ 413.5

Life and Non-life Insurance

218.9

19.8%

Banks,etc. 264.3

23.9%

Life and Non-life Insurance

211.8

19.4%

Banks,etc. 244.0

22.4%

37.9%

(Unit: trillion yen) (Unit: trillion yen)

Total ¥1,105.4 trillion Total ¥1,091.0 trillion

Source: Bank of Japan "Flow of Funds Accounts"

IR SPECIAL OFFICE‌

  • Happy New Year! May this be a happy and fruitful year for you all!

    In this column, I would like to introduce the New Year customs in Japan. In Japan, as some of you might know, we usually have the New Year holidays from January 1st to 3rd, which are called "Oshogatsu." We have various customs such as "Hatsumode" (visiting a shrine or a temple), "Otoshidama" (New Year's gift from seniors to juniors), and "Hagoita" (Battledore, a game like badminton) during the holidays. On the other hand, we also have customs that we "must not do."

    They are housework including housecleaning. Japanese people traditionally believe that a god called "Toshigami-sama" comes to their houses in the New Year, and they have to welcome this god. In this regard, cleaning the house is considered as an act of driving the god away. In addition, the New Year holidays are considered as a period to free people from housework.

    Therefore, most Japanese people still have customs to clean their houses and to cook traditional dishes called "Osechi" (please see picture) around the end of the year so that they do not need to do it in

    the New Year.

    The origins of the customs above are merely some of the theories. It is very interesting that all the customs we thoughtlessly follow have different origins. Do you have your own New Year customs? Do you know their origins?

  • Looking back on our IR activity after the annual personnel reshuffling in last July, we

conducted 4 overseas IR tours covering 11 countries and 14 cities to meet with debt management authorities and investors such as central banks and pension funds. Also, we had meetings with many foreign investors in Japan. Thank you for having given us precious opportunities. We were able to hear your valuable comments. We will unite to carry out JGB IR activities continuously in 2017, and we look forward to meeting you!

If you have any questions regarding the contents of this newsletter, please do not hesitate to contact us at: JGB-IR@mof.go.jp

-4-

Ministry of Finance of the State of Japan published this content on 04 January 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 04 January 2017 06:22:04 UTC.

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