Japanese retail government bond sales hit 6 trillion yen between April and October, nearly double the volume recorded during the same period last year. The Finance Ministry is actively supporting this shift to establish a dependable domestic investor base as the central bank scales back debt purchases. However, commercial lenders face mounting pressure as bank deposit growth of around 2 percent fails to keep up with loan growth of 5 to 6 percent. To sustain this momentum, authorities are currently considering tax incentives and longer-duration products, despite concerns from some lawmakers over income inequality.
Key points
Commercial banks face severe funding pressures as sluggish deposit growth threatens their…: Commercial banks face severe funding pressures as sluggish deposit growth threatens their ability to meet expanding loan demands.
The Finance Ministry seeks to cultivate individual domestic savers to absorb state debt w…: The Finance Ministry seeks to cultivate individual domestic savers to absorb state debt while the central bank tapers asset purchases.
Officials are reviewing longer-duration bond products and tax perks, though the proposed…: Officials are reviewing longer-duration bond products and tax perks, though the proposed tax incentives face political criticism regarding wealth inequality.
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TOKYO, Nov 6 : For years, Japanese savers left their cash in bank accounts that paid next to nothing because few things paid much more. With government bonds now yielding four times as much as deposits, that no longer holds and banks are starting to worry.
When the Bank of Japan last week declared victory in its near 14-year battle to lift inflation to its 2 per cent target, it closed a long chapter of near-zero interest rates.
Now, rising bond yields are making households more sensitive to returns on their money, fuelling a boom in government bond purchases and prompting some to shift a portion of the $7 trillion they hold out of bank deposits.
Takashi Kamachi, a 46-year-old self-employed businessman in Osaka, recently moved 600,000 yen ($3,785.01) of his teenage son's gift money, held for years in a Japan Post Bank account, into retail government bonds (JGBs).
"Banks are promoting time deposits again, but I thought government bonds looked far more attractive, perhaps four or five times better in terms of returns," he said.
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