The 44 th meeting of the Advisory Council on Government Debt Management The 44th meeting of the Advisory Council on Government Debt Management was held on May 31, 2017. (Agenda) 1. JGB Issuance Plan for FY2017 (report) (note1) 2. Overseas IR activities (report) 3. Revision of JGB Market Special Participants Scheme (report) (note 2) 4. Future trends in JGB markets and debt management policy Financial Bureau explained agenda 1, 2 and 3. In agenda 2, overseas IR activities in FY2016 were explained as follows: (i) 10 overseas IR tours covering 14 countries and 20 cities (98 meetings with central banks, pension funds, insurance companies, asset management companies, etc.) [North America] U.S. [Latin America] Mexico [Europe] U.K., France, Germany, Denmark, Sweden, Switzerland, Belgium [Asia and Pacific] Singapore, Hong Kong, New Zealand, Australia, Philippines (ii) 141 meetings in Japan, including regular visits (twice a year) to Tokyo offices of foreign central banks (iii) 6 presentations at seminars (3 in Japan, 3 overseas) (iv) Continuation of monthly issuance of English newsletters that contain a wealth of information about JGBs, etc. After the explanation from the Financial Bureau, council members Ms. Nishioka of Sumitomo Mitsui Banking Corporation and Mr. Inaida of Nomura Securities Co., Ltd. explained Japanese and world economy and financial markets. This was followed by a free exchange of opinions among the attendees on several points such as perspectives on demand for JGBs and trends in some economic indicators. Note1) JGB Issuance Plan for FY2017: http://www.mof.go.jp/english/jgbs/debt_management/plan/ Note2) Revision of JGB Market Special Participants Scheme: http://www.mof.go.jp/english/jgbs/topics/press_release/20170327-04e.htm The Ministry of Finance www.mof.go.jp What’s New ⇒ The 44 th meeting of the Advisory Council on Government Debt Management Monthly Topic ⇒ 1. Breakdown by JGB Holders (end of Mar.2017) 2. Basic Policies for Economic and Fiscal Management and Reform Monthly Newsletter of the Ministry of Finance, Japan JAPANESE GOVERNMENT BONDS July 2017 Contents 1. What’s New Monthly Topic IR Special Office …P.1 2. JGB Primary Market …P.6 3. The Auctions for Enhanced-Liquidity and JGB Buy-Back …P.7 4. JGB Secondary Market …P.8 5. Investor Trends and JGB Outstanding …P.10 6. Economic and Financial Trends …P.14 7. Information …P.15 This Month’s Special! WHAT’S NEW
15
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JAPANESE GOVERNMENT BONDS · The balance of JGBs held by domestic Banks in Q1 fell by 6.8 trillion yen to 225.8 trillion yen. General Government (ex Public Pensions) 3.8 0.3% Fiscal
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WHAT’S NEW
The 44th meeting of the Advisory Council on Government Debt Management The 44th meeting of the Advisory Council on Government Debt Management was
held on May 31, 2017. (Agenda)
1. JGB Issuance Plan for FY2017 (report) (note1)
2. Overseas IR activities (report)
3. Revision of JGB Market Special Participants Scheme (report) (note 2)
4. Future trends in JGB markets and debt management policy
Financial Bureau explained agenda 1, 2 and 3. In agenda 2, overseas IR activities
in FY2016 were explained as follows: (i) 10 overseas IR tours covering 14 countries and 20 cities (98 meetings with
central banks, pension funds, insurance companies, asset management companies, etc.)
[North America] U.S. [Latin America] Mexico [Europe] U.K., France, Germany, Denmark, Sweden, Switzerland, Belgium [Asia and Pacific] Singapore, Hong Kong, New Zealand, Australia, Philippines
(ii) 141 meetings in Japan, including regular visits (twice a year) to Tokyo offices of foreign central banks
(iii) 6 presentations at seminars (3 in Japan, 3 overseas)
(iv) Continuation of monthly issuance of English newsletters that contain a wealth of information about JGBs, etc.
After the explanation from the Financial Bureau, council members Ms. Nishioka of Sumitomo Mitsui Banking Corporation and Mr. Inaida of Nomura Securities Co., Ltd. explained Japanese and world economy and financial markets. This was followed by a free exchange of opinions among the attendees on several points such as perspectives on demand for JGBs and trends in some economic indicators.
Note1) JGB Issuance Plan for FY2017: http://www.mof.go.jp/english/jgbs/debt_management/plan/ Note2) Revision of JGB Market Special Participants Scheme: http://www.mof.go.jp/english/jgbs/topics/press_release/20170327-04e.htm
The Ministry of Finance www.mof.go.jp
What’s New ⇒ The 44th meeting of the Advisory Council on Government Debt Management Monthly Topic ⇒ 1. Breakdown by JGB Holders (end of Mar.2017)
2. Basic Policies for Economic and Fiscal Management and Reform
Monthly Newsletter of the Ministry of Finance, Japan JAPANESE GOVERNMENT BONDS
1. Breakdown by JGB (including T-Bills) Holders (end of Mar.2017) On June 27, the Bank of Japan (BOJ) released the Flow of Funds Accounts for the 1st Quarter 2017.
The shares of JGB (including T-Bills, hereinafter referred to as “JGBs”) holders were updated as follows:
<JGB Holdings by Foreign Investors> Foreign investors’ JGB investment has featured a focus on shorter-term issues. At the end of March
2017, they held 5.8% of JGBs (excluding T-Bills) and 51.9% of T-Bills.
Source: Bank of Japan “Flow of Funds Accounts (Preliminary Figures)”
MONTHLY TOPIC
The total amount of JGBs and T-Bills outstanding decreased by 0.4 trillion yen to 1,082.9 trillion yen.
BOJ increased its holdings of JGBs by 6.7 trillion yen to 427.3 trillion yen. BOJ is now holding around 40 percent
of outstanding JGBs. The balance of JGBs held by domestic Banks in Q1 fell by 6.8 trillion yen to 225.8 trillion yen.
General Government
(ex Public Pensions)
3.8
0.3%Fiscal Loan Fund
0.0
0.0%
BOJ
420.7
38.8%
Banks,etc.
232.6
21.5%
Life and Non-life
Insurance
207.5
19.2%
Public Pensions
49.0
4.5%
Pension Funds
31.3
2.9%
Foreigners
114.9
10.6%
Households
11.6
1.1%
Others
12.0
1.1%
General Government
(ex Public Pensions)
3.8
0.4% Fiscal Loan Fund
0.0
0.0%
BOJ
427.3
39.5%
Banks,etc.
225.8
20.9%
Life and Non-life
Insurance
205.5
19.0%
Public Pensions
49.0
4.5%
Pension Funds
30.8
2.8%
Foreigners
116.4
10.8%
Households
12.5
1.2%
Others
11.7
1.1%
Total ¥1,083.2 trillion
(Unit: trillion yen) (Unit: trillion yen)
(The end of Dec. 2016) (The end of Mar. 2017)
Total ¥1,082.9 trillion
Source: Bank of Japan
-2-
2. Basic Policies for Economic and Fiscal Management and Reform 2017 “Basic Policies for Economic and Fiscal Management and Reform 2017” was decided by the Cabinet on June 9, 2017. Its major aim is to improve productivity through investment in human resources.
■ Expansion of a “Virtuous Cycle of Growth and Distribution” 1. Work style reform and investment in human resources
・Implement “the Action Plan for the Realization of Work Style Reform” ・Invest more in human resources, improve the quality of university education, enrich recurrent education
2. Acceleration of growth strategies and other measures ・Promote “Investments for the Future Strategy 2017”
3. Stimulating personal consumption 4. Regional reinvigoration and support for SMEs and microenterprises 5. Securing the foundations for a safe and secure life and a sustainable economic society ■ Steady implementation of Integrated Economic and Fiscal Reform
・Aim at achieving both the 600 trillion yen GDP target and the fiscal consolidation target for FY2020 ・Improve productivity through strengthening investments into human resources and R&D
■ Short-term principles in economic and fiscal management and guiding principles in budget formulation for FY2018 ・The importance of achieving the fiscal consolidation target has not changed. Aiming at achieving a primary
surplus by FY2020 and steady reduction in the public debt to GDP ratio ・Steadily advance the three reforms of exiting deflation and achieving economic revitalization, expenditure
reform, and revenue reform, under the basic policy that there can be no fiscal soundness without economic revitalization
Key Elements of the Basic Policies
-3-
For more information, see: http://www5.cao.go.jp/keizai-shimon/kaigi/cabinet/2017/decision0609.html (Japanese) http://japan.kantei.go.jp/97_abe/actions/201706/2article3.html http://japan.kantei.go.jp/97_abe/actions/201706/9article3.html
Finance, made a speech at the investor conference in Paris. He delivered the presentation “Japan’s Economy and Policy Development” to around 100 participants from global official institutions such as central banks and debt management authorities. In the presentation, he talked about the
Japanese economy and public finance, as well as Japan’s role in the global economy. He explained there are three challenges confronting Japan, each starting with the letter “D,” and presented solutions for each issue. The three “D”s are Deflation, Demographic change and Debt. To overcome deflation, Mr. Otsuka emphasized that household and corporate
savings must be utilized to enhance consumption and investment. Among the structural policy efforts to this end, he introduced the Japanese government’s recent decision on “Investments for the Future Strategy 2017”.
On Japan’s demographic change, he referred to work-style reform and new technologies as solutions, along with Prime Minister Abe’s encouraging remarks: “Japan’s demography is not an onus, but a bonus.” Regarding debt, he pointed out it is
imperative to advance fiscal consolidation toward primary surplus, while maintaining economic growth to GDP 600 trillion yen, both of which have deadlines set in FY2020. Mr. Otsuka also mentioned Japan’s important
contribution to the worldwide expansion of trade and investment, which is necessary for containing the threat of de-globalization. Finally, Mr. Otsuka referred to another important event in 2020, the Tokyo Olympic and
Paralympic Games. He conveyed to the audience his wife’s warm welcome to the event, as she is endeavoring for the success of the games as incumbent Minister in charge. Mr. Otsuka is grateful for the participants’ attention and the positive responses to his
and his wife’s invitation to Tokyo 2020.
IR SPECIAL OFFICE
-4-
In the same week, the JGB IR team led by Mr. Ichikawa, Deputy Director-General of the Financial Bureau, visited Switzerland, Austria, France and Italy to have meetings with investors and the authorities. The team gave an update on the Japanese economic situation for investors, and
elaborated on the growth strategy. The BOJ’s monetary policy continues to provide a highly accommodative environment for the business sector, and fiscal policy aims at achieving both consolidation and economic growth through rationalizing the budget and improving the quality of public spending. The team also pledged that the Japanese debt management office will keep good communication with the market in formulating and managing its debt management plan. The team also visited debt management authorities in some countries and had useful exchanges of views on debt management practices and market environments.
From May 29 to May 31, Ms. Kimata, Director for debt management and JGB investor relations, and Mr. Ikeda, Section Chief, visited Toronto and Chicago to have meetings with investors. In the meetings, they were pleased to have fruitful discussions and learned a lot about recent trends in JGB investment.
After staying for 3 days in the two cities, the IR team
headed to Mexico City and then joined the 16th International Monetary Fund Public Debt Management Forum. In this forum, Ms. Kimata made a presentation to report on medium-term structural trends in Japan to the attendees. Presentations and discussions in the forum were very instructive and we hope our presentation also helps other country’s debt management policy.
If you have any questions regarding the contents of this newsletter, please do not hesitate to contact us at: [email protected]
Top 10 PDs by Total Purchase in Auctions (Calculated by Duration) (Oct. 2016 ~ Mar. 2017) 1 Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 6 Merrill Lynch Japan Securities Co., Ltd. 2 Daiwa Securities Co. Ltd. 7 Deutsche Securities lnc. 3 Nomura Securities Co., Ltd. 8 SMBC Nikko Securities Inc. 4 BNP Paribas Securities (Japan) Limited 9 Goldman Sachs Japan Co., Ltd. 5 Mizuho Securities Co., Ltd. 10 Citigroup Global Markets Japan Inc.
2 JGB PRIMARY MARKET
Note.1: The above calendar may be changed or added in light of changes in circumstances. In such cases, it will be announced in advance. Note.2: Each issue amount will be announced about one week prior to each auction date.
3 THE AUCTIONS FOR ENHANCED-LIQUIDITY AND JGB BUY-BACK
①Remaining maturity : approx.1‐~5‐year
③Remaining maturity : approx.15.5‐~39‐year
Note.1: JN shows 2‐year JGBs. JS shows 5‐year JGBs. JL shows 20‐year JGBs. JX shows 30‐year JGBs. JU shows 40‐year JGBs. Outstanding amount is as of the end of March 2017. Note.2: All issues in the graph above will be eligible afterward.
Amount issued by the Auction for Enhanced-liquidity Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity)
5 10 15.5
(Remaining maturities)
(billion yen)
0500
1,0001,5002,0002,5003,0003,5004,000
JX8
JL14
1JL
142
JX9
JL14
3JL
144
JX10
JL14
5JX
11JL
146
JX12
JL14
7JX
13JL
148
JX14
JL14
9JX
15JL
150
JX16
JL15
1JX
17JL
152
JX18
JL15
3JX
19JL
154
JX20
JL15
5JX
21JL
156
JX22
JL15
7JX
23JL
158
JX24
JL15
9JX
25JX
26JX
27JX
28JX
29JX
30JX
31JX
32JX
33JX
34JX
35JX
36JX
37JX
38JX
39JX
40JX
41JX
42JX
43JX
44JX
45JX
46JX
47JX
48JX
49JX
50JX
51JX
52JX
53 JU1
JU2
JU3
JU4
JU5
JU6
JU7
JU8
JU9
Amount issued by the Auction for Enhanced-liquidity Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity)(billion yen)
Note: BEI (Japan : old JGBi) is calculated based on the compound interest rate of the old Inflation-Indexed Bonds (issue number 16 with current maturity of 1 years and 1month) and the 10-Year Bonds (issue number 293 with current maturity of 1 years and 1month). BEI (Japan : 10 year) is calculated based on the compound interest rate of the new Inflation-Indexed Bonds and the 10-Year Bonds.
Source: Japan: Calculation by the Ministry of Finance based on the information on interest rates offered by NIKKEI QUICK. U.S.A., U.K. : Bloomberg.
4 JGB SECONDARY MARKET JGB Yield Curves
Source: Japan Bond Trading Co.,Ltd.
Yields of JGB
Long - Term Interest Rates (10Yr) Source: Bloomberg
Source: Bloomberg
-8-
Yield and Volatility (10Yr)
Break-Even Inflation Rates
Source: Bloomberg, Calculation by the Ministry of Finance
(Until 31 May 2017)
(Until 31 May 2017)
(Until 31 May 2017)
(Until 31 May 2017)
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
BEI (Japan : old JGBi) BEI (Japan : 10 year)
BEI (U.K. : 10 year) BEI (U.S.A. : 10 year)
0
500
1,000
1,500
2,000
2,500
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Bond-Lending
Bond-Gensaki
0
20
40
60
80
100
120
140
160
180
200
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Treasury Discount BillsMedium Term BondsLong Term Bonds
Short-Term Interest Rates
Source: Bank of Japan, Japanese Bankers Association
①Market Share of Foreign Investors (JGB Futures Market)
②Market Share of Foreign Investors (JGB Market)
③JGB Holdings by Foreign Investors
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
City Banks Trust Banks Insurance Companies Foreigners
-6
-5
-4
-3
-2
-1
0
1
2
3
4
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Short-term debt securities Long-term debt securities Equity and investment fund shares
Net
Purchase
Net
Sales
-1
-0.5
0
0.5
1
1.5
2
2.5
3
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Short-term debt securities Long-term debt securities Equity and investment fund shares
Net
Purchase
Net
Sales
-8
-6
-4
-2
0
2
4
6
8
10
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Short-term debt securities Long-term debt securities Equity and investment fund shares
Net
Purchase
Net
Sales
-11-
JGBs Holdings by Foreign Investors
Banks(Banking Accounts) Life Insurance Companies
Transactions of Domestic Securities by Non-Residents
Note: “JGB” includes T-Bills. Source: Bank of Japan
Source: Ministry of Finance Source: Japan Securities Dealers Association
Outstanding of Repurchase Agreements (by Investor types)
Transactions of Foreign Securities by Residents (by Investor types)
Source: Ministry of Finance
Foreign Investors Presence
Note.1: Quarterly basis. Note.2: “JGB” includes T-Bills. The figures of ②excludes dealers’ transactions. Source: Bank of Japan, Japan Securities Dealers Association, Tokyo Stock Exchange,
Breakdown by JGB and T-Bill Holders (The end of Mar. 2017 QE)
Source: Bank of Japan “Flow of Funds Accounts (Preliminary Figures)”
Note1: “JGB” includes FILP Bonds. “T-Bills” is the sum of “Treasury Bills (TBs) ” and “Financial Bills (FBs) ”with a maturity of 1 year or less and TBs and FBs have been jointly issued since February 2009.
Note2: “Banks, etc.” includes Japan Post Bank, “Securities investment trust” and “Securities companies”. Note3: “Life and Nonlife insurance” includes Japan Post Insurance.
(trillion yen)
Breakdown of Outstanding Amount of General Bonds by Remaining Years to Maturity
T-Bill Holders
Total 115.2 trillion yen
JGB Holders
Total 967.6 trillion yen
Total 1,082.9 trillion yen
-12-
Types The amount of redemption at maturity Scheduled redemption date
Market-held Balance of the Inflation-Indexed Bonds (as of May 31, 2017)
(trillion yen)
Scheduled redemption of JGB at maturity in July, 2017
Note.1: The figures are based on the outstanding JGBs at the end of May, 2017. Note.2: The figures are the scheduled redemption at maturity and may be different from the actual redemption due to Buy-back of JGBs. Note.3: The figures do not include "JGB for Retail Investors". Note.4: If the redemption date coincides with bank holiday, the payment of redemption is carried out on the following business day. Note.5: Figures may not sum up to total because of rounding.
CPI excluding food (excludingalcohilic beverages) and energy
Change from the previous year
Apr.4, 2013BOJ released QQE
4.4
-1.7 -1.7
0.5
4.94.1
2.5
-0.4
4.4
-7.4
-0.6
3.0
4.7
-0.3
0.7
-1.0
2.5 1.61.0
1.41.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ
2012 2013 2014 2015 2016 2017
(%)
Private Demand Public Demand
Foreign Demand Real GDP
Annualized rate of Change from the previous quarter (Seasonally adjusted)
(CY)
500
600
700
800
900
1,000
1,100
Jan-
09
Apr-
09
Jul-0
9
Oct
-09
Jan-
10
Apr-
10
Jul-1
0
Oct
-10
Jan-
11
Apr-
11
Jul-1
1
Oct
-11
Jan-
12
Apr-
12
Jul-1
2
Oct
-12
Jan-
13
Apr-
13
Jul-1
3
Oct
-13
Jan-
14
Apr-
14
Jul-1
4
Oct
-14
Jan-
15
Apr-
15
Jul-1
5
Oct
-15
Jan-
16
Apr-
16
Jul-1
6
Oct
-16
Jan-
17
Apr-
17
(billion yen)
Monthly Quarter (Mean)
0
50
100
150
200
250
300
350
400
450
500(trillion yen)
Banknotes in Circulation
Coins in Circulation
Current Account Balances
2.3
3.2
4.3 3.8
5.4
4.4
5.5
4.1
4.3
1.8
3.3
0.9
2.1
1.1 1.6
-0.0
1.6 2.1
1.7
-1.0 -0.5
0.9
2.0 1.6
4.3
3.9
4.9
3.1
5.9
4.6
5.8
4.1
5.8
-8
-6
-4
-2
0
2
4
6
8
2009
Q120
09Q2
2009
Q320
09Q4
2010
Q120
10Q2
2010
Q320
10Q4
2011
Q120
11Q2
2011
Q320
11Q4
2012
Q120
12Q2
2012
Q320
12Q4
2013
Q120
13Q2
2013
Q320
13Q4
2014
Q120
14Q2
2014
Q320
14Q4
2015
Q120
15Q2
2015
Q320
15Q4
2016
Q120
16Q2
2016
Q320
16Q4
2017
Q1
Primary Income Trade BalanceServices Secondary IncomeCurrent Account
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11
Jan-
12
May
-12
Sep-
12
Jan-
13
May
-13
Sep-
13
Jan-
14
May
-14
Sep-
14
Jan-
15
May
-15
Sep-
15
Jan-
16
May
-16
Sep-
16
Jan-
17
(Diffusion index)
Large enterprises/Manufacturing
Large enterprises/Non-Manufacturing
Small enterprises/Manufacturing
Small enterprises/Non-Manufacturing
Real GDP Growth Rate
Employment Conditions
Prices
Changes in Current Account
Monetary Base Indices of Industrial Production
Total Value of Machinery Orders (Private Sector exc. Volatile orders)
TANKAN (Business Conditions)
Source: Cabinet Office "Quarterly Estimates of GDP"
Source: Ministry of Internal Affairs and Communications “CPI”
Source: Ministry of Health, Labour and Welfare “Employment Referrals for General Workers “, Ministry of Internal Affairs and Communications “Labour Force Survey”
Source: Ministry of Finance “Balance of Payments"
Source: Ministry of Economy, Trade and Industry "Indices of Industrial Production”
Source: Cabinet Office, Government of Japan "Orders Received for Machinery"
(trillion yen)
6 ECONOMIC AND FINANCIAL TRENDS
Source: Bank of Japan "Monetary Base"
Source: Bank of Japan "Tankan"
-14-
English Publications on JGBs Frequency URL Debt Management
Message from the Financial Bureau As needed http://www.mof.go.jp/english/jgbs/debt_management/message.htm
About JGBs As needed http://www.mof.go.jp/english/jgbs/debt_management/guide.htm
About the Debt Management Policy As needed http://www.mof.go.jp/english/jgbs/debt_management/about.htm
JGB Issuance Plan As needed http://www.mof.go.jp/english/jgbs/debt_management/plan/index.htm