Japan's near-record retail bond sales equal 0.66% of households' cash and deposits

Sales through September averaged about 808 billion yen a month on the ministry's figures ^[20]. The distance left to the 2007 total of 7.5605 trillion yen ^[2] is therefore a little over a third of one average month ^[21]. Only a near-stop in household buying between October and December would leave the old mark standing ^[21].

Measured against household savings, the record is small. Nine months of sales equal about 0.66% of the roughly 1,100 trillion yen that households keep in cash and deposits ^[22], money that makes up about half of their financial assets ^[5]. The same sales come to about 61% of the 12 trillion yen that SMBC Nikko Securities thinks the Government Pension Investment Fund could add to bonds without changing its allocation ^[23]. SMBC Nikko says that pension-fund room is on the same scale as moving 1% of household cash and deposits into government bonds ^[12].

Tokyo had looked to the fund for help. In July, Finance Minister Satsuki Katayama said the government would explore how to nudge the GPIF and other pension funds toward putting more of their money into domestic financial assets ^[11]. Markets took that as a move to lift the fund's domestic bond weight from about 25%, and those expectations have since cooled ^[11]. The ministry's pitch to savers runs through an advertisement featuring the singer and actress Airi Suzuki ^[13]. It tells viewers the bonds are "issued by the state with no risk to your principal" ^[13], and it features Koko-chan, a mascot the ministry created for retail bonds in 2020 ^[17].

Estimates of how much more households could buy vary widely. If their bond share rises above the 2% recorded in 2008, the highest on record, the Nikkei counts room for about 30 trillion yen of extra purchases ^[7]. Mizuho Securities said household investment in government bonds could expand to about 100 trillion yen ^[8]. Barclays, in an August analysis, said household holdings could rise by as much as 80 trillion yen ^[9].

Barclays also estimated what that buying would do to yields. It put the effect at about 12 basis points off the 10-year yield and more than 20 off the 20- and 30-year yields ^[9]. Twelve basis points is less than a third of the 40-basis-point increase in this month's 10-year coupon ^[26], or rather of the market move the coupon was raised to follow, since the ministry accepted the higher interest bill because a below-market coupon weakens demand ^[16]. On the morning the new coupon was reported, the 10-year market yield touched 3.117%, about 1.7 basis points above it ^[27].

I think households will set the issuance record and remain a marginal funder of Japan's debt while rates keep moving at this year's pace. The counter-case is generational. Younger buyers are leading the move into bonds ^[14], and the NISA tax-exemption program has built a more active investing habit among them ^[15]. If that cohort carries household holdings toward American levels ^[6], the Mizuho figure starts to look modest. The report does not give the total stock of government bonds outstanding, so the share of Japan's debt that households fund cannot be worked out from it. The view is wrong if the household bond share clears 2008's 2% within a year or two ^[7].