Japan Considers Reducing Inflation-Linked Bond Issue

(Bloomberg) -- Japan’s Ministry of Finance is considering cutting the amount of inflation-linked bond issuance, as demand falls amid the coronavirus pandemic and plummeting oil prices.

The May issuance of inflation-linked bonds may be cut to around 200 to 250 billion yen from the current plan of 300 billion yen, which would be announced at Thursday’s bond market participants meeting, according to a person with knowledge of the matter. Reuters earlier reported the government’s possible plan to reduce issuance of the bonds.

Japan to Cut Issuance of Index-Linked JGBs by 100Bln Yen in May

As an alternative method of supporting the market, increasing the amount of inflation-linked bond buybacks this quarter is also being considered at a rate of tens of billions of yen, according to the person.

During the last bond market participants’ meeting in March, a monthly buyback plan of 20 billion yen for the April to June quarter was raised to 50 billion yen a month. In March, there was also a separate buyback worth about 300 billion yen.

Japan temporarily halted the issuance of inflation-linked bonds following the financial crisis, but for now MOF appears to be taking steps to support the market rather than stop issuance.

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