Mar Mar-56 -

Transcription

1 JAPANESE GOVERNMENT BONDS Monthly Newsletter of the Ministry of Finance, Japan This Month s Special! What s New Details of Auctions in Apr.-Jun. 216 Monthly Topic Breakdown by JGB and T-Bill Holders (Dec.215) WHAT S NEW Details of Auctions in Apr.-Jun. 216 On March 28, 216, the MOF issued a press release about the details of auctions in Apr.-Jun. 216 based on the discussion at the Meeting of JGB Market Special Participants (65th Round) and the Meeting of JGB Investors (64th Round). The plan could be changed owing to market conditions and other factors. Issuance and reopening schedule of the 1-year, 2-year, 3-year and 4-year Bonds (FY 216) Maturity Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Issue No Mar-26 2-Jun Issue No. Issue No. Issue No Mar-36 2-Mar-46-2-Jun-36 2-Jun-46-2-Mar-56-2-Mar-56 - Maturity Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Issue No Sep-26 2-Dec-26 TBD 2 Issue No Sep-36 2-Dec-36 TBD 3 Issue No Sep-46 2-Dec-46 TBD 4 Issue No Mar-56-2-Mar-56-2-Mar-56-2-Mar-56 WHAT S Contents NEW T h Apr What s New Monthly Topic IR Special Office P.1 2. JGB Primary Market P.7 3. The Auctions for Enhanced-Liquidity and JGB Buy-Back P.8 4. JGB Secondary Market P.9 5. Investor Trends and JGB Outstanding P Economic and Financial Trends P Information P.16 1-year Bonds 4 issues in FY216, except in the event of rapid market movements. 1-year Bonds will be newly issued in case the gap between the market interest rate on the auction day and the coupon rate of an issue with the same maturity is more than.3%. Note1) In FY216, 1-year Bonds, 2-year Bonds, and 3-years Bonds will be issued every month. Note2) Auction method for 4-year Bonds is Dutch-style-yield-competitive auction (.5 bp bidding scale). The Ministry of Finance

2 Issuance of the Inflation-Indexed Bonds on April-June 216 Issuance Amount on April 216 will be about 4 billion yen. Reopening method:1 issue in FY216. April, August, October 216 and February 217 issues will be the issue No. 21. (Maturity: March 2, 226, Reference CPI : December 215) Auction method is Dutch-style-price-competitive auction (.5 yen bidding scale). Auction Schedule of Buy-back Program of Inflation-Indexed Bonds on April-June 216. Auction Month April 216 Buy-back amount Approximately 2 billion yen May June 216 WHAT S NEW Approximately 2 billion yen Total Approximately 4 billion yen ( ) 1. The auctions will be conducted once in April and June. 2. Issues eligible for the buy-backs will be those from issue number 17 to The Ministry of Finance reserves the right not to accept part or all of bids. Maximum Issuance amount for Auctions for Enhanced-liquidity on April-June 216 April 216 May 216 June 216 (i) Issues with remaining maturities of 1-5 years May -2-years (issue numbers 352 to 362) -5-years (issue numbers 15 to 126) -1-years (issue numbers 286 to 314) -2-years (issue numbers 36 to 5) Approximately 2 billion yen (ii) Issues with remaining maturities of years April May June -1-years (issue numbers 315 to 341) -2-years (issue numbers 51 to 131) -3-years (issue numbers 1 to 5) Approximately 5 billion yen Approximately 5 billion yen Approximately 5 billion yen (iii) Issues with remaining maturities of years April -2-years (issue numbers 132 to 155) -3-years (issue numbers 6 to 49) -4-years (issue numbers 1 to 7) June -2-years (issue numbers 132 to 155) -3-years (issue numbers 6 to 49) -4-years (issue numbers 1 to 8) Approximately 4 billion yen Details: Approximately 4 billion yen Auctions for Buy-backs of 15-Year Floating-rate Bonds in and after April 216 Auctions for Buy-backs of 15-Year Floating-rate Bonds in and after April 216 shall not be conducted. -2-

3 <Reference> Summary of minutes of the Meeting of JGB Market Special Participants (65th Round) held on March 23, ) Amount of issuance of Inflation-Indexed Bonds (JGBi) in the Apr. Jun. 216 quarter, etc. The Financial Bureau explained as follows: JGBis market promotion is an important theme in debt management policy from the viewpoint of giving investors a way to hedge inflation risk. In FY215, the Break-Even Inflation ( BEI ) rate showed a downward trend, and especially at the timing of every auction, the level of BEI dropped. Recently, oil prices started to pick up, but the increment of the BEI rate in Japan is smaller than that in other developed countries. Regarding these circumstances, there are some views that this downtrend is temporary, just reflecting the economic fundamentals such as a decrease in oil prices. On the other hand, however, there are quite a lot of views that a constant supply-demand gap exists, because the investor base is still limited despite the effort of the authority. Moreover, some pointed out that a liquidity premium has been widened in a situation where a large price fluctuation made investors reluctant to purchase JGBis. Based on the circumstances described above, we asked for opinions of the Primary Dealers ( PDs ) and other investors in advance about the issuance of JGBis in April. Many said that in order to continue stable issuance of JGBis, the authority should improve the supply-demand balance and maintain liquidity by reducing the issuance amount and/or implementing Auctions for Buy-backs. We propose to reduce the issuance amount in April by 1 billion to 4 billion, and implement Auctions for Buy-backs of 2 billion in April and June respectively. We should suspend Auctions for Buy-back as soon as market liquidity improves, because we consider that Auctions for Buy-backs are temporary measures. Many of the attendees were of the opinion that the authority s proposal would present no problem, while some expressed the following opinions: We see no problem with the authority s proposal, but dealers need to firmly explain the idea of the authority to investors so that they do not misunderstand that the reduction in issuance amount means a decline in the commitment of the authority. If the authority reduces the issuance amount, it is possible that investors overseas will worry about the decline in the commitment of the authority, but the authority should give priority to supplying the appropriate amount to the market in order to improve the supply-demand balance. It is desirable that the issuance amount of 5 billion is maintained and that the Auctions for Buy-backs of 1 billion are implemented in April and June. Given that the authority has long increased the issuance amount in order to improve market liquidity so far, if the authority reduces the issuance amount, investors would understand that the authority gives less commitment. What the market participants want is a stable buyer, not a reduction in the issuance amount. If the implementation of Auctions for Buy-backs improves market liquidity, the investors now away from investing JGBis would come back to the market. 2) Auctions for Enhanced-Liquidity in the Apr.-Jun. 216 quarter The Financial Bureau explained as follows: We asked for the opinions in advance of PDs and other investors about the allocation of the issuance amount in each zone. The majority of the opinions were that, as for the zone of years remaining to maturity where an auction was implemented every month, the amount of 5 billion, the same amount as before, was appropriate. There were some opinions that, as for the allocation between the zone of 1-5 years and that of years remaining to maturity, the issuance amount of the latter zone should be increased when taking the recent strong needs for the super long-term zone into account. However, the majority was of the opinion that the issuance amount should be 4 billion for the latter zone and 2 billion for the former zone as proposed by the authority. -3-

4 Many of the attendees were of the opinion that the authority s proposal would present no problem, while some expressed the following opinion: The proposal by the authority has no problem for the initial allocation for adding the zone of 1-5 years remaining to maturity. However, it is desirable that the allocation among zones should be reviewed flexibly in the future. As for the zone of 1-5 years remaining to maturity, if the issuance amount is small, investors may feel a lack of market liquidity. I understand that reducing the issuance amount in the zone of years remaining to maturity is difficult, but the issuance amount in the zone of 1-5 years remaining to maturity should not be reduced below 2 billion. 3) Auctions for Buy-backs in the Apr.-Jun. 216 quarter (regarding the 15-year Floating-Rate Bond) The Financial Bureau explained as follows: As for 15-Year Floating-Rate Bonds, the authority has implemented the Auctions for Buy-backs as a crisis response since December 27, when the supply-demand balance broke significantly and prices fell largely. After that, prices recovered and under the judgment that the need to implement Auctions for Buy-backs decreased, we have gradually curtailed the purchasing amount since FY215. In particular, in and after February this year, the need to sell 15-Year Floating-Rate Bonds decreased largely, partly because interest rates in all zones of fixed rate bonds fell sharply, which resulted in the low level of 1.21 times the bid at the Outright Purchases of Japanese Government Bonds operation conducted by Bank of Japan ( BOJ ) this February. Furthermore, at the Auctions for Buy-backs conducted by the authority in this March, the maximum difference in purchasing price changed to a significant positive value of.55 yen. If we continue implementing Auctions for Buy-backs in these circumstances, we may purchase 15-Year Floating-Rate Bonds at a comparatively high price. Thus, we propose that we will suspend the Auctions for Buy-backs in and after this April. After that, we will pay attention to the coming market situation. When the supply-demand balance breaks significantly, we would like to resume Auctions for Buy-backs by taking into account the discussions in this meeting. Many of the attendees were of the opinion that the authority s proposal would present no problem, while some expressed the following opinion: It is desirable to keep on implementing the Auctions for Buy-backs. It is too early to assess market participants potential need to sell only by the results of Outright Purchases of Japanese Government Bonds operation and Auctions for Buy-backs in and after February. -4-

5 MONTHLY TOPIC Breakdown by JGB and T-Bill Holders (Dec.215) The Bank of Japan (BOJ) released the Flow of Funds Accounts of the 4th Quarter 215, and the shares of JGB and T-Bill holders were updated as follows: The total amount of JGBs and T-Bills outstanding decreased by 4.1 trillion yen to 1,35.8 trillion yen. BOJ increased its holdings of JGBs by 16.3 trillion yen to trillion yen. Foreigners increased their holdings share of JGBs in Q4 by.8% to 1.6%, reaching above 1% for the first time. The balance of JGBs held by domestic Banks in Q4 fell by 12.1 trillion yen to trillion yen. (The end of Sep. 215) (The end of Dec. 215) Pension Funds % Public Pensions % Households 14.5 Foreigners 1.4% % Others 9.6.9% General Government (ex Public Pensions) % Fiscal Loan Fund..% BOJ % Pension Funds % Public Pensions % Foreigners % Households % Others 9.3.9% General Government (ex Public Pensions) 2.4.2% Fiscal Loan Fund..% BOJ % Life and Non-life Insurance % Life and Non-life Insurance % Banks,etc % Banks,etc % Total 1,39.9 trillion Total 1,35.8 trillion Source: Bank of Japan Flow of Funds Accounts (Preliminary Figures) <JGB Holdings by Foreign Investors> JGB Holdings by Foreign Investors marked the record high of 19.8 trillion yen. 12% 11% Amount of JGB Holdings (right) Proportion of JGB Holdings (left) % 9% 8% 7% 6% 5 % 4% 3% 2% % Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 2 Note: JGB includes T-Bills. Source: Bank of Japan -5-

6 IR SPECIAL OFFICE Ministry of Finance officials attended several seminars in March, and participated in useful discussions on the Japanese economy under the negative interest rate policy. Mr. Manabu Sakai, State Minister of Finance, was invited to a seminar in Kyoto, the beautiful old capital of Japan, and addressed participants from foreign central banks and institutional investors. In his speech, Mr. Sakai pointed out that coordinated efforts by the government and the BOJ have improved Japan s growth prospects dramatically, and that Abenomics is now progressing to its second stage, where the government endeavors to create a positive cycle of growth and distribution. Mr. Sakai also pledged that the government should implement the fiscal consolidation plan steadily and that the negative interest rate policy would never lead to a loosening of fiscal discipline. Mr. Ichikawa, Deputy Director-General of the Financial Bureau, attended panel discussions in Toronto and New York, both held by the Japan Securities Dealers Association. In addition to the current economic and fiscal situation, he explained the New Three Arrows in detail. He stressed that improved income distribution and working conditions through greater support for the working generation would address structural bottlenecks of the Japanese economy, and have a significant impact on its long-term growth perspectives. The importance of labor market reform was echoed by other panelists, too. In New York, the IR team visited several institutional investors and had a frank exchange of views on the prospects of the Japanese economy and the impact of the negative interest rate on the JGB market. As the policy change came only a month ago, it was difficult to make a solid, quantitative assessment of the new policy. That said, the team expressed that the government welcomed the BOJ s efforts on the price front, and looked forward to seeing a good influence on the economy soon. If you have any questions regarding the contents of this newsletter, please do not hesitate to contact us at: JGB-IR@mof.go.jp -6-

7 2 JGB PRIMARY MARKET Auction Date Type of Security Issue Number Auction Results (Bonds) Nominal Coupon Amounts of Competitive Bids Amounts of Bids Yield at the Lowest Price Yield at the Average Price Amounts of Non-Competitive Bids Tendered / Amounts of Bids at the Non-pricecompetitive Auction Ⅰ Amounts of Bids at the Non-pricecompetitive Auction Ⅱ 1/5/216 1-year /2/225.3% 7,16.9 2, %.254% /7/216 3-year 49 12/2/ % 2, % 1.224% /13/216 1-year Inflation-Indexed Bonds 2 3/1/225.1% 1, % /19/216 5-year /2/22.1% 9, , %.16% /21/216 2-year /2/235 1.% 3,817. 1, %.924% /28/216 2-year 361 2/15/218.1% 11,52.2 2, %.18% /2/216 1-year /2/225.3% 6, , %.78% /9/216 3-year 49 12/2/ % 2, % 1.68% /16/216 2-year /2/235 1.% 3, , %.786% /18/216 5-year /2/22.1% 8, , %.138% /23/216 4-year 8 3/2/ % 1, % /25/216 2-year 362 3/15/218.1% 9, , %.183% /1/216 1-year 342 3/2/226.1% 6, , %.24% /8/216 3-year 5 3/2/246.8% 3, %.765% /1/216 5-year 127 3/2/221.1% 8, , %.142% /17/216 2-year 156 3/2/236.4% 3,354. 1, %.427% /25/216 2-year 363 4/15/218.1% 1, , %.221% Auction Date Type of Security Issue Number Auction Results (Treasury Discount Bills) Amounts of Competitive Bids Amounts of Bids Yield at the Lowest Price Yield at the Average Price (Until 25 March 216) (Until 25 March 216) Amounts of Bids at the Non-pricecompetitive Auction Ⅰ 1/7/216 3-month 58 4/11/216 19, , %.214% /8/216 6-month 581 7/11/216 14, , %.68% /14/216 3-month 582 4/18/216 19, , %.276% /18/216 1-year 583 1/2/217 9,93. 2, %.727% /21/216 3-month 584 4/25/216 2, , %.212% /28/216 3-month 585 5/2/216 17, , %.356% /4/216 3-month 586 5/12/216 17,271. 4, %.138% /8/216 6-month 587 8/1/216 12,61.1 3, %.1743% /1/216 3-month 588 5/16/216 15, , %.1335% /17/216 1-year 589 2/2/217 1,87.5 2, %.161% /18/216 3-month 59 5/23/216 16,613. 4, %.19% /25/216 3-month 591 5/3/216 15,66.6 4, %.166% /3/216 3-month 592 6/6/216 17, , %.118% /8/216 6-month 593 9/12/216 13,79.1 3, %.1294% /1/216 3-month 594 6/13/216 15, , %.92% /16/216 1-year 595 3/21/217 1, , %.1641% /17/216 3-month 596 6/2/216 16, , %.125% /24/216 3-month 597 6/27/216 18, , %.138% Auction Calendar for Mar. May 216 Auction Date Issue Auction Date Issue Auction Date Issue Auction Date Issue 3/1(Tue) 1-year 3/25(Fri) 2-year 4/21(Thu) 2-year 5/19(Thu) T-Bills (3-month) 3/3(Thu) T-Bills (3-month) 4/5(Tue) T-Bills (3-month) 4/25(Mon) Auctions for Enhanced-liquidity 5/19(Thu) 2-year 3/3(Thu) Auctions for Enhanced-liquidity 4/5(Tue) 1-year 4/27(Wed) T-Bills (3-month) 5/24(Tue) Auctions for Enhanced-liquidity 3/8(Tue) T-Bills (6-month) 4/6(Wed) T-Bills (6-month) 4/27(Wed) 2-year 5/26(Thu) T-Bills (3-month) 3/8(Tue) 3-year 4/7(Thu) T-Bills (3-month) 5/6(Fri) Auctions for Enhanced-liquidity 5/26(Thu) 4-year 3/1(Thu) T-Bills (3-month) 4/7(Thu) Auctions for Enhanced-liquidity 5/1(Tue) T-Bills (3-month) 5/31(Tue) 2-year 3/1(Thu) 5-year 4/12(Tue) 1-year Inflation-Indexed Bonds 5/1(Tue) 1-year 3/16(Wed) T-Bills (1-year) 4/14(Thu) T-Bills (3-month) 5/11(Wed) T-Bills (6-month) 3/17(Thu) T-Bills (3-month) 4/14(Thu) 3-year 5/12(Thu) T-Bills (3-month) 3/17(Thu) 2-year 4/18(Mon) T-Bills (1-year) 5/12(Thu) 3-year 3/23(Wed) Auctions for Enhanced-liquidity 4/19(Tue) 5-year 5/17(Tue) 5-year 3/24(Thu) T-Bills (3-month) 4/21(Thu) T-Bills (3-month) 5/18(Wed) T-Bills (1-year) Note.1: The above calendar may be changed or added in light of changes in circumstances. In such cases, it will be announced in advance. Note.2: Each issue amount will be announced about one week prior to each auction date. Top 1 PDs by Total Purchase in Auctions (Calculated by Duration) (Jul. 215 ~ Dec. 215) 1 Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 6 SMBC Nikko Securities Inc. 2 Nomura Securities Co., Ltd. 7 Merrill Lynch Japan Securities Co., Ltd. 3 Daiwa Securities Co. Ltd. 8 BNP Paribas Securities (Japan) Limited 4 Mizuho Securities Co., Ltd. 9 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 5 Goldman Sachs Japan Co., Ltd. 1 JPMorgan Securities Japan Co., Ltd. -7-

8 3 THE AUCTIONS FOR ENHANCED-LIQUIDITY AND JGB BUY-BACK Auction Date Amounts of Competitive Bids Amounts of Bids (billion yen) Results of Auctions for Enhanced-Liquidity Average Spread Highest Spread 1/15/216 1, % +.15% 1/26/216 1, %.7% 2/4/ %.2% 2/12/216 1, % +.15% 3/3/216 1, %.1% 3/23/216 1, %.8% Issues Re-opened (Until 25 March 216) 2-year(132,141) 3-year(6,38,39) 1-year(313,314,315,316,317,318,319,322,323,324,325,33) 2-year(57,58,75,76,78,79,8,81,82,92,12,13,15,118,123) 2-year(13,131,133,134,138,14,141,147) 3-year(8,1,2,22,23,24,28,31,36,37,38,39,41,42) 4-year(5,7) 1-year(313,314,315,316,317,318,319,32,321,322,323,324,325,326,327,328,33,332,336,337) 2-year(49,55,56,58,59,6,61,65,7,78,84,86,87,88,89,91,99,128) 3-year(21,22,23,25,26,29,3,31,32,37,41,45,46,48) 4-year(4,5,6,7) 1-year(318,32,322,323) 2-year(49) 7,5 7, 6,5 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Target Zones of the Auction for Enhanced-Liquidity for the Fourth Quarter of FY 215 1Remaining maturity : approx.5 ~15.5 year Amount issued by the Auction for Enhanced-liquidity Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity) JL49 JL JL JL JL53 JL JL JL56 JL JL JL59 JL6 328 JL JL62 JL JL JL65 JL JL67 JL68 JL JL7 JL JL JL73 JL JL75 JL76 JL JL78 JL79 JL8 34 JL81 JL82 JL83 JL84 JL85 JL86 JL87 JL88 JL89 JL9 JL91 JL92 JL93 JL94 JL95 JL96 JL97 JL98 JL99 JL1 JL11 JL12 JL13 JL14 JL15 JL16 JL17 JL18 JL19 JL11 JL111 JL112 JL113 JX1 JL114 JL115 JX2 JL116 JL117 JX3 JL118 JL119 JL12 JL121 JL122 JX4 JL123 JL124 JL125 JL126 JL127 JX5 JL128 JL (Remaining maturities) 4, 3,5 3, 2,5 2, 1,5 1, 5 2Remaining maturity : approx.15.5 ~39 year Amount issued by the Auction for Enhanced-liquidity Outstanding amount in the market (excluding amount issued by the Auction for Enhanced-liquidity) JL13 JL131 JX6 JL132 JL133 JL134 JL135 JL136 JX7 JL137 JL138 JL139 JL14 JX8 JL141 JL142 JX9 JL143 JL144 JX1 JL145 JX11 JL146 JX12 JL147 JX13 JL148 JX14 JL149 JX15 JL15 JX16 JL151 JX17 JL152 JX18 JL153 JX19 JL154 JX2 JX21 JX22 JX23 JX24 JX25 JX26 JX27 JX28 JX29 JX3 JX31 JX32 JX33 JX34 JX35 JX36 JX37 JX38 JX39 JX4 JX41 JX42 JX43 JX44 JX45 JX46 JX47 JX48 JU1 JU2 JU3 JU4 JU5 JU6 JU (Remaining maturities) Note.1: JL shows 2 year JGBs. JX shows 3 year JGBs. JU shows 4 year JGBs. Outstanding amount is as of the end of December 215. Note.2: All issues in the graph above will be eligible afterward. 15-Year Floating-Rate Auction Date Amounts of Competitive Bids Amounts of Bids Buy-back Results Average Spread (yen) Highest Spread (yen) Issue Numbers 9/7/ ,25,37,38,4,42,45,46,48 11/26/ ,24,38,39,4,41,42,43,44,45,46,47,48 1/22/ ,17,18,21,22,24,34,38,39,4,41,42,43,44,46,47 (Until 29 February 216) -8-

9 4 JGB SECONDARY MARKET JGB Yield Curves 2.% 8% Yield and Volatility (1Yr) (Until 29 February 216) 1.4% 1.5% 7% 6% Volatility Yield (right scale) 1.2% 1.% 1.% 5%.8% 215/3/31 4%.6%.5% 215/6/3 215/9/3 3%.4%.% 215/12/3 216/1/29 216/2/29 2% 1%.2%.% -.5% Source: Japan Bond Trading Co.,Ltd. 3.% 2.5% % -.2% Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 Source: Bloomberg, Calculation by the Ministry of Finance Yields of JGB (Until 29 February 216) 2-year bond 5-year bond 1-year bond 2-year bond 3-year bond 4-year bond 2.% 1.5% 1.%.5%.% -.5% Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bloomberg 5% 4% Long - Term Interest Rates (1Yr) Japan United Kingdom (Until 29 February 216) United States Germany 3% 2% 1% % Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16-1% 4% Source: Bloomberg Break-Even Inflation Rates (Until 29 February 216) 3% 2% 1% % -1% BEI (Japan : old JGBi) BEI (Japan : 1 year) -2% BEI (U.K. : 1 year) BEI (U.S.A. : 1 year) -3% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Note: BEI (Japan : old JGBi) is calculated based on the compound interest rate of the old Inflation-Indexed Bonds (issue number 16 with current maturity of 2 years and 4 months) and the 1-Year Bonds (issue number 293 with current maturity of 2 years and 4 months). BEI (Japan : 1 year) is calculated based on the compound interest rate of the new Inflation-Indexed Bonds and the 1-Year Bonds. Source: Japan: Calculation by the Ministry of Finance based on the information on interest rates offered by NIKKEI QUICK U.S.A., U.K. : Bloomberg -9-

10 .5%.4%.3% Short-Term Interest Rates (Until 29 Feburay 216) Call Rate (Uncollateralized Overnight) TIBOR 3-months (Euro-Yen) Basic Loan Rate.2%.1%.% -.1% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bank of Japan ; Japanese Banker Association JGB Over-the-Counter Trading Volume (TOKYO) 1,2 1,1 Treasury Discount Bills 1, Medium Term Bonds 9 Long Term Bonds Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Japan Securities Dealers Association Trading Volume of 1-Year JGB Futures Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Tokyo Stock Exchange (until Mar.214), Osaka Exchange (from Apr. 214) 2,5 2, Repurchase Transactions Bond-Lending Bond-Gensaki 1,5 1, 5 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Japan Securities Dealers Association -1-

11 5 INVESTOR TRENDS AND JGB OUTSTANDING (unit: trillion yen) 5. Net Purchase 3. Trends in JGBs Transactions (by investor type) City Banks (unit: trillion yen) 2. Net Purchase 1.5 Regional banks Super long-term Long-term Medium-term T-bills Net Sale Net Sale Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan (unit: trillion yen) Net Purchase Net Sale -1. Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Source: Japan Securities Dealers Association Life and non-life insurance companies City Banks (unit: trillion yen) Net Purchase Net Sale -4. Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Trends in Bank Assets by Types Foreigners Regional Banks Loans Cash and Deposits Government Bonds Municipal Bonds Corporate Bonds Equities Foreign Securities Source: Bank of Japan Apr 213 (Actual) Feb 216 (Actual) The pace of annual increase Monetary Base About 8 trillion JGBs About 8 trillion CP Corporate Bonds Maintain the outstanding balance Maintain the outstanding balance ETFs About 3 trillion J-REITs About 9 billion Total Assets BOJ Trends QQE Total Assets Monetary Base JGBs QQE2 Actual +8 tril yen +8 tril yen Source: Bank of Japan Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct

12 Transactions of Foreign Securities by Residents (by Investor types) Banks(Banking Accounts) Short-term debt securities Long-term debt securities Equity and investment fund shares Net Purchase Net Sales -5 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Ministry of Finance Life Insurance Companies Short-term debt securities Long-term debt securities Equity and investment fund shares Net Purchase Net Sales -1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Ministry of Finance Transactions of Domestic Securities by Non-Residents Net Purchase Net Sales Short-term debt securities Long-term debt securities Equity and investment fund shares -8 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Ministry of Finance 45% 4% 35% 3% 25% 2% 15% 1% 5% Outstanding of Repurchase Agreements (by Investor types) City Banks Trust Banks Insurance Companies Foreigners % Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Japan Securities Dealers Association 6% 5% 4% 3% 2% 1% Foreign Investors Presence 1Market Share of Foreign Investors (JGB Futures Market) 2Market Share of Foreign Investors (JGB Market) 3JGB Holdings by Foreign Investors 54.7% 29.% 1.6% 12% 11% 1 % 9% 8. 8% 7.4 7% 6% % 4% 3% JGBs Holdings by Foreign Investors Amount of JGB Holdings (right) Proportion of JGB Holdings (left) % % Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Note.1: Quarterly basis. Note.2: JGB includes T-Bills. The figures of 2excludes dealers transactions. Source: Bank of Japan, Japan Securities Dealers Association, Tokyo Stock Exchange, Osaka Exchange 1 % Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Note: JGB includes T-Bills. Source: Bank of Japan 2-12-

13 Breakdown by JGB and T-Bill Holders (Dec. 215) Pension Funds % Public Pensions % Foreigners % JGB and T-Bill Holders Households % Others 9.3.9% General Government (ex Public Pensions) 2.4.2% Fiscal Loan Fund..% BOJ % Pension Funds % Public Pensions % Foreigners % JGB Holders Households % Others % General Government (ex Public Pensions) 2.4.3% Fiscal Loan Fund..% BOJ % Life and Non-life Insurance % Banks,etc % Total 1,35.8 trillion yen Foreigners % Households..% T-Bill Holders Others..% General Government (ex Public Pensions)..% Fiscal Loan Fund..% BOJ % Life and Non-life Insurance % Banks,etc % Banks,etc % Total trillion yen Pension Funds..% Public Pensions..% Life and Non-life Insurance % Total trillion yen Note.1: "JGB" includes FILP Bonds. "T-Bill" is the sum of "Treasury Bills (TBs)" and "Financial Bills (FBs)" with a maturity of 1 year or less and TBs and FBs have been jointly issued since February 29. Note.2: "Banks, etc." includes Japan Post Bank, "Securities investment trust " and "Securities Companies". Note.3: "Life and Nonlife insurance" includes Japan Post Insurance. Source: Bank of Japan Flow of Funds Accounts (Preliminary Figures) Breakdown of Outstanding Amount of General Bonds by Remaining Years to Maturity % 1.6% % 2.7% 12.2% 13.8% 14.5% 14.8% 5.7% 5.4% 5.5% 5.% 6.% 6.3% 5.9% 6.2% 4.8% 5.8% 6.% 5.5% 4.2% 3.9% 4.8% 5.6% 5.6% 7.7% 4.2% 4.6% 5.3% 8.5% 8.6% 8.4% 8.4% 8.3% 9.% 9.2% 1.9% 8.3% 8.2% 8.9% 13.2% 12.8% 13.% 11.5% 11.4% % 17.7% 4.6% 16.5% % 3.6% 14.9% 14.4% 4.2% 4.6% 14.4% 4.3% 4.4% 4.8% 5.2% 5.2% 4.7% 5.6% 4.5% 4.5% 4.7% 5.1% 5.3% 5.2% 4.8% 5.% 4.3% 4.8% 4.5% 5.5% 4.6% 4.2% 5.% 5.2% 4.4% 4.9% 4.9% 4.7% 7.8% 7.8% 7.4% 5.2% 7.8% 8.4% 8.8% 8.1% 8.1% 8.2% 8.6% 9.% 8.4% 8.1% 7.8% 7.8% 7.9% 8.6% 8.5% 12.5% 11.9% 12.4% 12.% 11.1% 21.7% 2.3% 18.6% 17.% 17.8% 18.3% 18.2% 17.9% 17.3% 16.4% % % % 2 yrs- 1-2 yrs 9-1 yrs 8-9 yrs 7-8 yrs 6-7 yrs 5-6 yrs 4-5 yrs 3-4 yrs 2-3 yrs 1-2 yrs -1 yr FY25 FY26 FY27 FY28 FY29 FY21 FY211 FY212 FY213 FY214 Average YTM * 5Y4M 5Y9M 6Y1M 6Y3M 6Y5M 6Y8M 7YM 7Y3M 7Y7M 8YM Average YTM * (excluding saving bonds) 5Y3M 5Y8M 6Y1M 6Y4M 6Y6M 6Y1M 7Y1M 7Y5M 7Y8M 8YM -13- (at the end of FY) *years to maturity

14 Time-to-Maturity Structure of Outstanding JGB(Dec. 215) Average remaining years to maturity: 8 years and 3 months 1 Treasury Bills 9 2-yr bonds 8.39 JGBs for retail investors (3-yr-Fixed-rate) 8 JGBs for retail investors (5-yr-Fixed-rate) yr bonds 7 Inflation-Indexed bonds JGBs for retail investors (Floating-rate) 5 1-yr bonds yr-floating-rate bonds yr bonds yr bonds yr bonds (FY) Source: Ministry of Finance Scheduled redemption of JGB at maturity in April, 216 Types The amount of redemption at maturity Scheduled redemption date 2-Year Bonds 2,724.2 April 15 Treasury Bill 2,1. April 2 Total 4,824.2 Note.1: The figures are based on the outstanding JGBs at the end of February, 216. Note.2: The figures are the scheduled redemption at maturity and may be different from the actual redemption due to Buy-back of JGBs. Note.3: The figures do not include "JGB for Retail Investors". Note.4: If the redemption date coincides with bank holiday, the payment of redemption is carried out on the following business day. Note.5: Figures may not sum up to total because of rounding. 18 Outstanding (right-hand scale) General Bonds Issuance Amount and Outstanding Issuance Amount (left-hand scale) ,2 2,1 2, 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1, Note 1: Issuance Amount: revenue basis, FY24-214: actual, FY215: supplementary budget, FY216: initial budget Note 2: Outstanding: nominal basis, FY23-214: actual, FY : estimates Source: Ministry of Finance Market-held Balance of the Inflation-Indexed Bonds (as of February 29, 216) Outstanding amount (excl. BOJ holding) Old type BOJ holding (without floor) Market BOJ Total Old 1,4 1,98 2,12 New 4, , (issue number) Source: Ministry of Finance, Bank of Japan JGB Holdings by Retail Investors 45 5.% 4.6%4.6% 4.2%4.3%4.4% 4.5% 4.5% 4.6% 4.5% 4.5% Total JGBs held by retail investors (left) 4.4%4.3%4.3% Outstanding "JGBs for retail investors" (left) 4.1% 4.1% 4 4.%3.9% 3.7% 3.8% Ratio of JGBs held by retail investors (right) % 4.% % 3.5% 3.6% % % %3.1% % 3.% 3.% 2.9%2.7% % 2.6% % 2.3% 2.6% 3 2.5%2.4%2.2% % % 2.%2.1% 2.2%2.1% %1.9% % 2.% % %1.4% % % % % % Mar - 3 Mar - 4 Mar - 5 Mar - 6 Mar - 7 Mar - 8 Mar - 9 Mar - 1 Mar - 11 Mar - 12 Mar - 13 Mar - 14 Mar - 15 Mar - 16 Dec - 12 (Note) Outstanding "JGBs for retail investors" at Mar-16 is calculated to aggregate issues of 46.3trillion - redemption before maturity of 14.4trillion - aggregate redemption money of 21.trillion. Other figures based on Bank of Japan Flow of Funds statistics. (Source) Ministry of Finance, Bank of Japan Flow of Funds 1-14-

15 6 ECONOMIC AND FINANCIAL TRENDS (%) Real GDP Growth Rate Annualized rate of Change from the previous quarter (Seasonally adjusted) Prices (%) Change from the previous year CPI Apr.4, 213 CPI excluding food (excluding BOJ released QQE alcohilic beverages) and energy % -8. Private Demand Public Demand % 5.5% 5.% 4.5% 4.% 3.5% 3.% Source: Cabinet Office "Quarterly Estimates of GDP" Employment Conditions 2.5% Aug, times 2.%.6 Job opening-to-application ratio 1.5% (right scale).5 1.%.4 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Ministry of Health, Labour and Welfare Employment Referrals for General Workers, Ministry of Internal Affairs and Communications Labour Force Survey % Source: Bank of Japan "Monetary Base" (Diffusion index) 3% 2% 1% % 5 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Jul, % Unemployment rate (left scale) Banknotes in Circulation Coins in Circulation Current Account Balances Monetary Base TANKAN (Business Conditions) -7.9 Foreign Demand Real GDP (ratio) 1.4 Jan, times 1.3 Jan, % (CY) % -1 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Ministry of Internal Affairs and Communications CPI Changes in Current Account Primary Income Services Current Account Source: Ministry of Finance Balance of Payments" Trade Balance Secondary Income Indices of Industrial Production Source: Ministry of Economy, Trade and Industry "Indices of Industrial Production Total Value of Machinery Orders (Private Sector exc. Volatile orders) Q1 28Q2 28Q3 28Q4 29Q1 29Q2 29Q3 29Q4 21Q1 21Q2 21Q3 21Q4 211Q1 211Q2 211Q3 211Q4 212Q1 212Q2 212Q3 212Q4 213Q1 213Q2 213Q3 213Q4 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 (21 average=1 Seasonally Adjusted Index) , 9 Production Inventory Shipments Inventory Ratio Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 1,1 Monthly Quarter (Mean) -2% -3% -4% -5% -6% Large enterprises/manufacturing Large enterprises/non-manufacturing Small enterprises/manufacturing Small enterprises/non-manufacturing % Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Source: Bank of Japan "Tankan" Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Source: Cabinet Office, Government Japan "Orders Received for Machinery"

16 7 INFORMATION English Publications on JGBs Frequency URL Debt Management Message from the Financial Bureau As needed About JGBs As needed About the Debt Management Policy As needed JGB Issuance Plan As needed Auction Calendar Auction Calendar Monthly Historical Data of Auction Results Each Auction Topics Product Characteristics of the JGB As needed Treasury Discount Bills (T-Bills) Annual Japanese Government Guaranteed Bonds Annual Interest Rate Swap Semiannual Taxation of Government Bonds As needed For Individual Investors As needed Data Central Government Debt Quarterly Interest Rate Daily STRIPS Monthly Dialogue with the market Advisory Councils on Government Debt Management Each Meeting Meeting of JGB Market Special Participants Each Meeting Meeting of JGB Investors Each Meeting Publications Debt Management Report Annual JGB Newsletter Monthly To subscribe to our Newsletter mailing list, please Debt Management Policy Division, Financial Bureau, Ministry of Finance Kasumigaseki, Chiyoda-ku, Tokyo Japan Phone: Web: