REPEAT: MNI: Japan MOF To Cut FY18 JGBs for 4th Straight Year

     TOKYO (MNI) - Japan's Ministry of Finance said Friday that it plans to sell

Y149.9 trillion of government bonds in fiscal 2018 starting on April 1, down

Y4.1 trillion from an initial Y154.0 trillion for the current fiscal year.

     The drop in bond issuance in fiscal 2018, the fourth straight year, is due

to a decline in refinancing bond issuance, thanks to super-low bond yields.

     --LOWEST IN A DECADE

     The expected bond issuance in fiscal 2018 worth Y149.9 trillion is the

lowest level since fiscal 2008, when the MOF issued Y135.7 trillion.

     The assumed interest rate of the 10-year bond yield for fiscal 2018 stays

at a record low of 1.1%, unchanged from the current fiscal year.

     The amount of the JGBs to be sold to institutional investors through

auctions will decrease for the fifth consecutive year in fiscal 2018 by Y7.0

trillion to Y134.2 trillion from Y141.2 trillion, the initial issuance plan for

fiscal 2017.

     The MOF will reduce the issuance of 1-year Treasury discount bills as well

as 2-, 5-, 10-. 30- and 40-year government bonds.

     The MOF has taken advantage of continued low bond yields caused by the Bank

of Japan's aggressive monetary easing, which has temporarily pushed some yields

into negative territory since the central bank adopted a negative interest rate

policy in 2016.

     --LONG BONDS CUT

     But at the same time, for fiscal 2018, the ministry has decided to cut the

issuance of longer-end bonds in order to maintain market stability over the long

term and in response to changing demand. Large investors, mainly life insurance

firms, are less interested in super long-term bonds amid lower returns.

     The reduction of 40-year bond issuance will be the first time ever and the

cut of 30-year bond issuance will be the first since fiscal 2001.

     Massive asset purchases by the BOJ as part of its large-scale monetary

easing since April 2013 are drying up the bond market. At the end of September,

the BOJ held about 40.9% of Japan's debt outstanding that has topped Y1

quadrillion (Y1,087 trillion), double of its GDP.

     It is based on the BOJ's latest policy framework under which it is trying

to keep the 10-year Japanese government bond yield around zero percent.

     The MOF will sell Y33.7 trillion in new bonds to finance the fiscal 2018

budget, down from this fiscal year's initial plan to sell Y34.4 trillion and the

lowest since 2008, when it planned to sell Y33.2 trillion. The issuance of JGBs

to refinance maturing bonds will fall to Y103.2 trillion from Y106 trillion the

previous fiscal year.

     Bonds issued to help rebuild Japan's northeastern region hit by the 2011

earthquake will also decrease to Y1.0 trillion from Y1.6 trillion while bonds to

finance the government's Fiscal Investment and Loans Program will be unchanged

at Y12.0 trillion.

     Under the fiscal 2018 budget, the government will issue 40-year debt

totaling Y2.4 trillion, down 600 billion from the current fiscal year's initial

plan. The issuance of 30-year debt will be reduced to Y8.4 trillion from Y9.6

trillion.

     The MOF will leave the sale of 20-year bonds unchanged at Y12.0 trillion in

fiscal 2018.

     In fiscal 2018, the MOF will sell Y26.4 trillion of 10-year bonds, down

from Y27.6 trillion in the current fiscal year; Y24.0 trillion in five-year

notes, down from Y26.4 trillion; Y25.2 trillion in 2-year notes, down from Y26.4

trillion; Y21.6 trillion in 1-year Treasury bills; down from Y23.8 trillion.

     The ministry will also sell inflation-indexed 10-year bonds worth Y1.6

trillion, unchanged from the current fiscal year's initial plan.

     The ministry plans to auction liquidity-providing bonds worth Y12.6

trillion next fiscal year, up from Y10.8 trillion in the current fiscal year.

These bonds are aimed at providing the market with additional supply to fill

specific shortages.

     --BOND ISSUANCE DETAILS

     The following is a list of JGBs to be sold to the primary market in fiscal

2018, according to the MOF's draft budget. Initial plans for fiscal 2017 are in

parentheses.

     - 40-year bonds: Y2.4 trillion (Y3.0 trillion)

     - 30-year bonds: Y8.4 trillion (Y9.6 trillion)

     - 20-year bonds: Y12.0 trillion (Y12.0 trillion)

     - 10-year bonds: Y26.4 trillion (Y27.6 trillion)

     - 5-year bonds: Y24.0 trillion (Y26.4 trillion)

     - 2-year bonds: Y25.2 trillion (Y26.4 trillion)

     - 1-year bills: Y21.6 trillion (Y23.8 trillion)

     - 10-year indexed bonds: Y1.6 trillion (Y1.6 trillion)

     - Liquidity injection auctions: Y12.6 trillion (Y10.8 trillion)

     - Market issuance total: Y134.2 trillion (Y141.2 trillion)

     - Non-price auctions: Y9.9 trillion (Y6.8 trillion)

     - Bonds for individual investors: Y3.3 trillion (Y3.0 trillion)

     - Total: Y149.9 trillion (Y154.0 trillion)

     The following is a list of the size of JGB sales per auction in fiscal 2018

with the number of auctions. The figures in the initial fiscal 2017 budget are

in parentheses.

     - 40-year bonds: Y400 billion x 6 times (Y500 billion x 6)

     - 30-year bonds: Y700 billion x 12 (Y800 billion x 12)

     - 20-year bonds: Y1.0 trillion x 12 (Y1.0 trillion x 12)

     - 10-year bonds: Y2.2 trillion x 12 (Y2.3 trillion x 12)

     - 5-year bonds: Y2.0 trillion x 12 (Y2.2 trillion x 12)

     - 2-year bonds: Y2.1 trillion x 12 (Y2.2 trillion x 12)

     - 1-year bills: Y1.8 trillion x 12 (Y1.9 trillion x 2: Y2.0 trillion x 10)

     - 10-year indexed bonds: Y400 billion x 4 (Y400 billion x 4)

     - Liquidity injections: undecided, Y12.6 trillion (Y10.8 trillion)

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com