Finance Minister Katayama said the government will study tax incentives for retail JGB investors, a move that could boost demand for government debt. Long-end yields are under upward pressure. She reiterated Japan's stance on Hormuz.
Japan's Finance Minister Satsuki Katayama said Tuesday the government will study tax incentives for retail investors in government bonds, a move aimed at broadening the domestic investor base with long-end yields under sustained upward pressure.
Speaking at a regular news conference, Katayama said it is important to make retail JGBs more attractive, according to Reuters. The finance ministry has already received a range of opinions on a scheme for retail JGB investors, she said, and expects further tax reform requests to follow.
The comments come as the 10-year and 30-year JGB yields have climbed to multi-year highs, driven partly by speculation over the government's expansionary fiscal stance and the Bank of Japan's gradual reduction of bond purchases. The government's fiscal 2027 budget process is expected to test the commitment to balancing growth and debt sustainability.
Katayama said Japan intends to balance fiscal sustainability with growth and will communicate that stance clearly to markets as the budget process develops. The BOJ has been reducing its bond purchases, and the government's budget decisions will shape the supply-demand balance for JGBs.
Any tax changes would first need to clear discussions within the ruling Liberal Democratic Party, a process that could take months. The scheme would provide an additional source of demand beyond domestic institutions and the BOJ, potentially easing some of the upward pressure on yields if implemented.
On foreign policy, Katayama reiterated that Japan hopes for an early reopening of the Strait of Hormuz and said Tokyo will respond appropriately to developments in US-Iran peace talks. The remarks add little to Japan's established diplomatic posture but underline the government's continued monitoring of the shipping route, given Japan's reliance on Middle Eastern oil. The stability of the strait is a factor in the yen's risk premium, though the direct impact from Katayama's comments is limited.
The finance ministry plans to discuss the tax proposals with the LDP in the coming months as part of the fiscal 2027 budget process.
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