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Japan fund managers chase retail cash as JGB yields surge
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Japan fund managers chase retail cash as JGB yields surge
Aug 11, 2026 7:04 PM

* More firms selling funds based on Japanese government

bonds

* Yields on long-term JGBs now rival those of US Treasuries

and German bunds

* Analysts expect the government to raise JGB issuance by 15

trillion yen this year

By Junko Fujita

TOKYO, Aug 12 (Reuters) - After years of paying investors

almost nothing, Japanese government bonds are suddenly worth

owning again, and domestic asset managers are hurrying to give

ordinary investors a way in.

With yields on long-term JGBs now rivalling those of U.S.

Treasuries and German bunds, Mitsubishi UFJ Asset Management has

joined Daiwa Asset Management and Amova Asset Management in

selling investment trusts focused on the super-long bonds.

Japan's 30-year JGBs trade at a near 4% yield,

higher than Germany's 30-year bond yield of around 3.6%, and

close to the 5.2% of 30-year U.S. Treasuries.

While the size of each fund is relatively small at no more than

3 billion yen ($18.84 million), their proliferation is a sign of

reinvigoration of the debt market that had been dominated by the

central bank for more than a decade.

"Until recently, you would lose money holding JGBs," said

Takayuki Yagi, an executive officer at Mitsubishi UFJ. "But now

if you have both JGBs and stocks, you can get textbook

diversification."

The Mitsubishi UFJ Asset fund, due to launch in September, will

focus on low coupon bonds with maturities of 20 years issued

during the Bank of Japan's regime of ultra-loose monetary

policy.

Prices for that tranche of JGBs have fallen sharply of late,

driving yields higher, as the BOJ carried out its long-term

normalisation of policy. But the discount pays off for buyers

who hold to maturity, receiving 100% of the face value.

The main avenue for Japanese households to invest in government

bonds has traditionally been so-called retail JGBs, on offer

since 2003 and coming in maturities of 3, 5, and 10 years. The

securities are not traded and remain a small fraction of the

overall JGB market, though the market is growing fast and the

government is aiming to increase their uptake to diversify its

investor base.

"Japan's yield curve is the steepest among major countries,

but retail investors have not really had opportunities to take

advantage of it," said Shinichi Sawamura, general manager at the

fixed income department of SBI Securities, which has been

selling JGBs with maturities between 10 and 40 years since 2021.

BOJ REDUCING JGB HOLDINGS

Finding willing buyers of JGBs is a matter of key importance

for the Japanese government. The BOJ is expected to reduce its

JGB holdings by 48 trillion yen this fiscal year and to continue

that pace of reduction, according to Takafumi Yamawaki, head of

Japan Rates Research at JPMorgan Securities Japan.

Against that, the government is expected to increase JGB

issuance by 15 trillion yen this year and to continue to tap

debt markets to fund a massive stimulus plan and tax cuts,

Yamawaki added.

Amova launched an investment trust for JGBs with 30-year

maturities in November last year aiming to deliver 4% annual

returns. The fund's assets stood at 554 million yen by the end

of June, representing slower-than-expected growth.

"Retail investors are worried that the yields may rise

further," said Takuya Kanazawa, a senior vice president of the

product development department at Amova.

So some asset managers shifted their focus to the shorter end

of the JGBs, with the 2-year yield reaching a

31-year high of 1.64% on Wednesday on bets the BOJ would raise

rates as early as September.

Daiwa Asset Management in June added an investment trust

focused on JGBs maturing in two years.

"This is going to be a competitive product against two-year

fixed deposits," said Yasuaki Matsuba, the firm's senior

managing director. "And this is good for those who cannot wait

for 30 years for the bonds to mature."

($1 = 159.2600 yen)

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