Japan To Start Issuing Green Bonds In Efforts to Push Climate Change Efforts

According to a top official, Japan's Ministry of Finance is considering issuing green transition bonds in the second half of the next fiscal year, beginning in April, as part of plans to push climate change efforts.

Japan intends to issue 1.6 trillion yen in such bonds in the fiscal year that ends in April 2024, with a focus on 10-year and 20-year maturities.

"It takes time for preparations for obtaining certification, ascertaining investor needs, and determining duration and other consideration, I think the timing for issuance will be in the latter half of next fiscal year," Michio Saito, financial bureaus chief at the Ministry of Finance, told TV Tokyo.

The rare media appearance by a top bureaucrat coincides with rising public interest in debt management.

Saito stated that his ministry is attempting to extend the duration of government bond (JGB)holdings in order to correct the heavy issuance of short-term JGBs issued since 2020 to fund COVID-19 relief measures.

"It will be like hand-to-mouth operations if we rely too much on short term government bonds," Saito said. The average duration of government bond issuance estimated for next fiscal year is eight years and one month, six months shorter that the current fiscal year.

Saito said his ministry has no preset expectations on the future of interest rates or the economy.

"We will need to respond if the market situation changes dramatically over investor demands such as durations and zones," Saito said. "We will appropriately conduct debt management, which centres on ascertaining market needs and allocate issuance by duration."

Interest rates remain low, according to Saito, but the current situation will not last indefinitely, as evidenced by spikes in overseas bond market yields.

Saito, who heads the ministry's division responsible for issuing Japanese government bonds (JGBs), is also known as "Mr. JGB" for his market expertise, having been involved in overhauling the market system around 2000, when the government heavily sold JGBs to the market.