JGBs

Japanese Government Bonds, or JGBs, are debt securities issued by the Government of Japan to finance public spending and refinance maturing debt. They are a core part of Japan’s domestic financial markets and are widely used by banks, insurers, pension funds, and other institutions as a source of relatively liquid, low-risk assets. JGBs are typically considered a benchmark for long-term rates in Japan.

JGBs come in several types and maturities. The most common are fixed-rate nominal JGBs, issued with periodic coupon payments and maturities ranging from short to long term, including 2-, 5-, 10-, 20-, and 30-year issues, with occasional longer maturities such as 40-year series. Inflation-indexed bonds (JGBi) adjust principal and interest payments based on consumer price inflation. Floating-rate notes (FRNs) reset their coupons periodically based on short-term reference rates. Together, these instruments provide a broad spectrum for investors with different risk and return preferences.

Issuance and market structure are overseen by the Japanese Debt Management Office (DMO) under the Ministry of Finance. JGBs are issued through regular auctions and are traded in the secondary market on the Tokyo financial markets, with clearing and settlement supported by JASDEC. The Bank of Japan’s monetary policy framework, including yield curve control and large-scale asset purchases, has a significant influence on JGB prices and yields.

Investors in JGBs include domestic financial institutions, life insurers, pension funds, and, to a lesser extent, foreign buyers. Risks for holders include interest-rate and duration risk, liquidity risk in longer maturities, and changes in monetary policy or debt dynamics. JGB markets are among the largest and most liquid government bond markets globally.