Japanese Government Bonds

Japanese Government Bonds or JGBs are the most popular market for government debt traders in Asia. The 10 year bond issued by Japan’s Ministry of Finance tends to be the price tracked by most CFD trading and spread betting companies, although bonds are issued with a range of maturities from two out to 40 years. The 10 year bond is also used as a benchmark by those investing in JGBs to measure the level of demand for other Japanese sovereign debt, such as 20 or 30 year bonds.

Japan is one of those lucky countries with a relatively tame local institutional investor base. This means that many new bond auctions are snapped up by large Japanese banks and pension funds, and the Japanese government has less of a problem financing its debts. However, Japan is one of the most heavily indebted of the G10 countries, and without this cushion of large corporations investing in JGBs it would have to pay much higher rates of interest for its debt.

Despite the inability of Japan’s business sector to recover from the popping of the bubble economy in 1989-90, Japan’s conservative political scene and large economy make its sovereign debt an attractive asset to own when other markets are taking a hammering. Investors will frequently turn to investing in JGBs when other Asian positions look less attractive.