Mitsubishi UFJ & Morgan Stanley Securities estimates that total Japanese government bond issuance in fiscal year 2027 may reach ¥190 trillion, an increase of approximately ¥10-20 trillion from the initial FY26 plan of ¥180.7 trillion. The increase will primarily come from two sources: new deficit financing bonds and transitional bonds specifically funded for the "new investment framework."
MUMSS further points out that the government's order of absorbing the new supply is roughly clear: first, increase JGB sales to individual investors; then consider increasing short-term treasury bill issuance; and finally, utilize pre-issued quotas. Only if these methods are insufficient will the government be forced to increase interest-bearing JGB issuance.
As of August of this fiscal year, retail JGB sales have reached ¥4.2 trillion, equivalent to approximately 72% of the annual plan. Rising interest rates are improving retail investor acceptance; there is still room for further issuance of short-term treasury bills.
