Debt Management Systems

Transcription

1 3 Debt Management Systems (1) System Fig.2-17 Mechanism of General Account Transfer Fixed-rate transfer Special transfer on tax reduction-related Special Deficit-financing Bonds Transfer of budgetary surplus Direct budget transfer Proceeds from sales of government-owned shares belonging to the GDCF Special Account Revenues from investment management Revenue from tobacco special tax GDCF Special Account Revenues from Refunding Bond issues Private Sector Public Sector Note.1: System of JGBs belonging to the General Account. Note.2: Proceeds from sales of government-owned shares of Tokyo Metro Co.,Ltd, and Japan Post Holdings Co.,Ltd, etc are appropriated for the redemption resources of Reconstruction Bonds.

2 A. Methods When redeeming JGBs, redemption rules will be applicable as set forth in related legislations. a. 60-Year Rule (Construction Bonds and Special De cit-financing Bonds) The 60-year redemption rule is applicable to redeeming Construction Bonds and Special De cit- Financing Bonds so that these JGBs, including Refunding Bonds, will be entirely redeemed for a 60-year period (). of JGBs is nanced with two revenue sources : cash from such sources as a fixed-rate transfer from the General Account and revenues from issuing Refunding Bonds in accordance with applicable rules. The 60-year redemption rule is maintained in this way. When redeeming Special Deficit-Financing Bonds, the government will strive to redeem these bonds as soon as possible as set forth in its governing law. Figure.2-18 will give you an idea about how the 60-year redemption rule works. Suppose you issue 600 billion yen of debt in xed-rate coupon-bearing 10-year bonds, at maturity (i.e., 10 years from now) you will redeem 100 billion yen of them in cash ( ) -equivalent to 1/6 of 600 billion yen -while issuing Refunding Bonds to cover the remaining 500 billion yen. Assuming that these Refunding Bonds will also be issued in xed-rate coupon-bearing 10-year bonds, then you will redeem 100 billion yen in cash -1/6 of the initial issue amount of 600 billion yen -in another 10 years. While issuing Refunding Bonds to cover the remaining 400 billion yen. Repeat this for four more times, then, you'll be able to complete the cash redemption in 60 years from the rst issuance. As shown in the gure below, because annual xed-rate transfer is calculated based on the JGB outstanding amount at the beginning of the previous fiscal year, it decreases along with the decrease in the JGB outstanding amount. Therefore, fixed-rate transfer will be insu cient to nance bond redemption in cash. For this reason, bond redemption will also be complemented with a surplus fund, budget fund, and proceeds from sales of government owned shares. Fig.2-18 via Refunding Bonds - "60-Year Rule" The rule stands on the fact that the average economic depreciation period of the assets purchased by the construction bonds is about 60 years. Deriving from this rule is the 1.6 ratio for xed-rate transfer for each fiscal year, which is about equivalent to one-sixtieth. The term cash redemption in this context means that bond redemption is not financed with issuing Refunding Bonds. From the viewpoint of individual bond holders, their JGBs will always be redeemed with cash at maturity. Construction Bonds, Special Deficit-Financing Bonds Refunding Bonds [Financing the Special Account to Appropriate for Redeeming] Issuance and of Government Bonds Outstanding Construction Bonds, Special Deficit- Financing Bonds Fixed rate transfer Cash redemption Refunding Bonds After 10 years after 2 11years % 10= after 12 21years % 10= after 22 31years % 10= after 32 41years % 10= after 42 51years % 10=32 Amount of Issuance of Refunding Bonds of every 10 years 100 After 20 years After 30 years After 40 years After 50 years After 60 years after 52 61years % 10=16 Total 336 Shortfall Total 264

3 b. Methods for Reconstruction Bonds c. Other Methods for JGBs

4 B. Resources a. Resources for Construction Bonds and Special De cit-financing Bonds Transfer from the General Account i. Fixed-rate transfer (1.6 of total government bond outstanding as of the beginning of the previous scal year) ii. Special transfer on tax reduction-related Special De cit-financing Bonds iii. Transfer of a budgetary surplus (A minimum of half of the surplus in the General Account as a result of the settlement of the scal year) iv. Direct budget transfer (A discretionary transfer specified by the General Account budget when necessary)

5 Others i. Proceeds from government-owned shares belonging to the GDCF Special Account ii. Proceeds from allocation iii. Special Tobacco Tax Revenues b. Resources for Reconstruction Bonds Revenues from Special Taxes for Reconstruction

6 Non-tax Revenues i. Utilizing Reserves in the Special Account for the FILP ii. Proceeds from government-owned shares Utilizing Settlement Surplus c. Resources for Other JGBs s C. GDCF Special Account a. Basic roles

7 b. Secondary roles Contributing to nancing the National Treasury Compensating for de cit in the General Account D. Recent Measures for GDCF Special Account a. Reducing GDCF Balance Fig.2-19 Changes in outstanding amount of GDCF

8 Fig.2-20 Reduction of GDCF Balance Before The balance of the GDCF (pool of future redemption resources for JGBs) had been conventionally maintained at the level prepared for operational risks (being unable to issue Refunding Bonds due to reasons such as large-scale disasters or system failure) (10.5 trillion yen at the end of FY 2012). Tax Revenue FY2013 General Account Revenues from issues of JGBs for General Account Tax Revenue Revenues from issues of JGBs for General Account General Account Market GDCF Special Account Preparation for operational risks: 10.5 trillion yen (as of the end of FY 2012) Transfer based on 60-Year Rule etc. Actualization of operational risks Transfer based on 60-Year Rule etc. Revenues from Refunding Bond issues Revenues from Refunding Bond issues Market GDCF Special Account In cases of operational risks, it becomes possible to respond by temporary borrowing from the Bank of Japan. Thus the balance of the GDCF is reduced to the level prepared for accidental underbidding in JGB auctions, which is not covered with the temporary borrowing from the Bank of Japan (3 trillion yen at the end of FY 2013). Reducing the balance Preparation for the risk of incidentally not meeting auction targets of JGBs: 3 trillion yen (as of the end of FY 2013) Actualization of operational risks the Bank of Japan Temporary Borrowings

9 b. Revised Act on Special Accounts Fig.2-21 GDCF Special Account Reform Income from issuance of refunding bonds 1. Making incomes from front-loading issuance of Refunding Bonds become revenues in the next year <Before revision> Front-loading issuance in the previous year fees Brought forward to the current year as surplus JGBs reaching maturity in the current year Refunding Bonds issued in the current year Frontloading issuance in the current year 4/1 3/31 Included in the revenues in the current year Brought forward to the next year as surplus <After revision> fees Frontloading issuance in the previous year JGBs reaching maturity in the current fiscal year Refunding Bonds issued in the current year 4/1 3/31 Included in the revenues in the current year Frontloading issuance in the current year Included in the revenues in the next year 2. Transferring administrative expenses to the General Account

10 (2) Interest Rate Swap Transaction (3) Auctions for Enhanced-Liquidity

11 (4) Buy-back Program

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13 Fig.2-22 Mechanisms for Auctions of Enhanced-Liquidity and Buy-Backs Buy-backs Buy-back for outstanding bonds through auction The total Buy-back amount in FY trillion yen Debt Management Office Issuance Auctions for Enhanced-Liquidity Additional issuance of outstanding bonds through auction The total amount in FY2017: 10.8 trillion yen The Auctions for Enhanced-Liquidity will be conducted at the current level based on the recognition that the auction should be a supplementary measure. Fig.2-23 Transition of Auctions for Enhanced-Liquidity Issuance amount and frequency per month (Unit: billion yen) <Target> 20-Year Bonds <Function> Liquidity enhancing measures for the zone with structural lack liquidity Lehman Brothers' bankruptcy (deepening of financial crisis) <Target> 10-Year Bonds 20-Year Bonds 30-Year Bonds Expanded the target zone (remaining maturity to 6-29 years) <Function> Liquidity enhancing measures for the individual issues whose liquidity have been reduced by several reasons Raised total market issuance amount responding to the formulation of the stimulus package (+16.9 trillion yen) Remainig maturity years (20-Year Bonds 30-Year Bonds) (Note 2) Market BOJ introduced "Quantitative and Qualitative Monetary Easing" (2013/4 ) Expanded the target zone to all issues except current issues (remaining maturity over 5 years) responding to a fall in liquidity of the JGB market Remaining maturity 15(15.5)-39 years (20-Year Bonds 30-Year Bonds 40-Year Bonds) (Note 2) (Note 3) Remaining maturity years (20-year Bonds) Remaining maturity years (20-Year Bonds 30-Year Bonds) (Note 1) Remainig maturity 6-15(16) years (10-Year Bonds 20-Year Bonds) (Note 1) Remainig maturity 5-15(15.5) years (10-Year Bonds 20-Year Bonds 30-Year Bonds) (Note 2) Remaining maturity 1-5 years (2-, 5-, 10- and 20-Year Bonds) (Note 3) These bonds maturing in 1-5 years were added to JGBs subject to Auctions for Enhanced-Liquidity to maintain and enhance JGB market liquidity. 2006/4 2008/4 2008/ / /7 2014/4 2015/4 2016/4 2017/4 (Note 4)

14 Fig.2-24 Image of Auction for Enhanced-Liquidity Planned issuance amount: 10 billion yen Yield spread 10-year # year # year #5 Dealer A 4 bil Dealer B 2 bil Dealer A 1 bil Dealer C 3 bil 6 bil 3 bil [Auction result] Dealer A: bil bil Dealer B: bil Dealer C: bil Fig.2-25 Transition of the Buy-back Program (Unit:billion yen) 1,100 Coupon-bearing JGB 1, Year Floating-Rate 10-Year Inflation-Indexed (issued before August 2008) Year Inflation-Indexed (issued after October 2013) FY2007 1Q FY2007 2Q FY2007 3Q FY2007 4Q FY2008 1Q FY2008 2Q FY2008 3Q FY2008 4Q FY2009 1Q FY2009 2Q FY2009 3Q FY2009 4Q FY2010 1Q FY2010 2Q FY2010 3Q FY2010 4Q FY2011 1Q FY2011 2Q FY2011 3Q Note: Figures are based on actual amount. (FY2017 1Q ; estimated amount) FY2011 4Q FY2012 1Q FY2012 2Q FY2012 3Q FY2012 4Q FY2013 1Q FY2013 2Q FY2013 3Q FY2013 4Q FY2014 1Q FY2014 2Q FY2014 3Q FY2014 4Q FY2015 1Q FY2015 2Q FY2015 3Q FY2015 4Q FY2016 1Q FY2016 2Q FY2016 3Q FY2016 4Q FY2017 1Q

15 (5) Dialogue with Market Participants A. The Advisory Council on Government Debt Management B. The Meeting of JGB Market Special Participants C. The Meeting of JGB Investors D. The Meeting of JGB Top Retailers

16 Fig.2-26 Dialogue with the Markets The Meeting of JGB Market Special Participants Share ideas with securities companies, etc.(pds). Promotion of JGB holdings The Meeting of JGB Investors Dialogue with institutional investors such as insurance companies, banks, funds, and asset management companies. Dialogue with market participants Debt Management Office Overseas IR Explain the current status and future of the Japanese economy, debt management policies etc directly to foreign investors. The Advisory Council on Government Debt Management Obtain opinions and advices on the government debt management policy from intellectuals in the private sector. The Meeting of JGB Top Retailers Dialogue with financial institutions involving actively in promotion for retail JGB holdings.