Japanese Government Bonds and the Monetary Policy by Bank of Japan

Contents 1. Introduction 2. JGBs issued and outstanding 2.1 Outstanding Japanese Government Bonds indicators 2.2 The main types of government bonds in Japan and the 60-year redemption rule 2.3 JGBs and BOJ underwriting 3. The History of Monetary Policy by Bank of Japan 3.1 From QE(2001~2006) to QQE(2013~2015) 3.2 The basic loan rate and the deposit reserve ratio 3.3 QQE with Negative Interest Rates and QQE with Yield Curve Control 4. Deterioration and Normalization of JGBs market 4.1 Holding of JGBs 4.2 Exhaustion of secondary market for JGBs 4.3 Monetary Policy Normalization and Challenges in Japan 5. Conclusion SummaryJapan's outstanding government debt as a percentage of GDP is exceptionally high internationally, but this is thought to be due to Japan's unique methods, such as the 60-year redemption rule.Since 2013, Bank of Japan has rapidly increased the amount of its outright purchases of government bonds.In addition, since 2016, negative interest rates have been introduced, and a portion of current account deposits have been subject to negative interest rates, but this was lifted in March 2024.The rate of infl ation in Japan had been on a long-term downward trend until 2019, so monetary easing continued for a long time.As a result, Bank of Japan's share of government bond holdings reached nearly 50%.Furthermore, Bank of Japan's share of 10-year government bonds reached around 80%.As a result, general trading in the government bond secondary market has shrunk.Bank of Japan raised its policy interest rate to 0.25% in July 2024, but in the future, in addition to the burden of interest payments on the government's fi nances, Bank of Japan's own fi nancial burden will be an issue.