Key facts
- Japanese government bonds are offering attractive yields, with 30-year JGBs trading near 4%.
- Mitsubishi UFJ Asset Management, Daiwa Asset Management, and Amova Asset Management are launching investment trusts focused on JGBs.
- The Bank of Japan is expected to reduce its JGB holdings by 48 trillion yen this fiscal year.
- The Japanese government plans to increase JGB issuance by 15 trillion yen this year.
- Yields on 2-year JGBs have reached a 31-year high of 1.64%.
Japanese government bonds (JGBs) are becoming an attractive investment again, prompting domestic asset managers to offer new ways for ordinary investors to access them. Yields on long-term JGBs have surged, with 30-year bonds now offering close to 4%, surpassing yields on comparable German bonds and nearing U.S. Treasury levels. This resurgence is driven by the Bank of Japan's (BOJ) long-term policy normalization, which involves reducing its JGB holdings. Mitsubishi UFJ Asset Management, Daiwa Asset Management, and Amova Asset Management are among those launching investment trusts focused on these higher-yielding bonds. Mitsubishi UFJ's upcoming fund will target low-coupon bonds with maturities of 20 years, while Amova's fund, launched last year, aims for 4% annual returns. However, retail investor adoption has been slower than expected, with some concerned about further yield increases. In response, some managers are shifting focus to shorter-term JGBs, such as 2-year bonds, where yields have reached a 31-year high of 1.64%, offering an alternative to fixed deposits. The Japanese government also plans to increase JGB issuance to fund stimulus measures and tax cuts, while the BOJ is expected to continue reducing its bond holdings.