JGB

Japanese Government Bond (JGB) refers to debt securities issued by the Government of Japan through the Ministry of Finance to finance public spending. JGBs are issued in a range of maturities from short-term bills (3, 6, and 12 months) to long-term bonds with maturities up to 40 years, and most carry semiannual coupon payments. They are typically issued at or near par value.

Primary issuance occurs at regular auctions conducted by the Ministry of Finance, with participation by banks, insurers, pension funds, and other financial institutions; foreign investors are also active in the market. The JGB market is among the most liquid government bond markets in Asia, with trading concentrated in over-the-counter platforms and screened price feeds, and with bonds also traded via futures and other derivatives.

Monetary policy by the Bank of Japan has a strong influence on JGB prices and yields, including large-scale asset purchases and, for a period, yield curve control aimed at guiding short- and medium-term rates. Because of government backing, JGBs carry negligible credit risk relative to corporate debt, but they are exposed to interest-rate risk and inflation risk, and their prices respond to policy changes and global capital flows.

JGBs serve as a benchmark for Japanese rates and as a core component of many investors’ fixed-income portfolios, used for hedging, duration management, and yield curve strategies. The term JGB is widely used to refer to Japanese Government Bonds collectively.