Japan Retail Bond Sales Surge in Shift Away from Low-Yield Bank Deposits

In 2026, retail Japanese government bond (JGB) sales to individual investors have surged and already exceeded the total volume of 2025. Following the Bank of Japan's end of ultra-loose monetary policy two years ago, positive interest rates have returned, making government bonds an attractive investment for those seeking a secure place to store their money.

Retail JGBs can be bought in increments of ¥10,000 and come in three types: fixed-rate bonds with 3 and 5-year terms, and 10-year floating-rate bonds with rates reset every six months. They are issued monthly.

According to the Ministry of Finance, retail bonds issued from January to August 2026 amounted to ¥6.2 trillion, which is 1.7 times the amount issued in the same period a year earlier and has already surpassed the ¥5.3 trillion total for all of 2025. The August issuance, for which applications were accepted the previous month, was ¥1.0 trillion, marking the first time a monthly issuance exceeded ¥1 trillion since January 2014.

The surge in volume signals the growing popularity of retail JGBs among investors. In March 2024, Bank of Japan Governor Ueda Kazuo ended the BOJ's longstanding ultra-loose monetary easing policy, discontinuing negative interest rates and abolishing the framework for maintaining artificially low long-term interest rates on 10-year Japanese government bonds. Since then, interest rates on 3-year and 5-year retail government bonds have risen to 1.71% and 2.06%, respectively, based on investor demand.

Comparatively, bank time-deposit interest rates have lagged in rising, being around 1.0 to 1.3 percentage points lower than retail JGB rates. As of July, retail JGBs offered interest rates approximately 1.0 to 1.3 percentage points higher than time deposits. People aged 70 and above hold an average of ¥7.8 million in time deposits, and the NLI Research Institute estimates that shifting these holdings to retail JGBs would increase annual after-tax income by over ¥70,000.

However, retail bonds cannot be redeemed within the first year of purchase, making them unsuitable for unexpected cash needs. The government is actively promoting retail bond sales, as the BOJ under Governor Ueda has gradually reduced its bond purchases. As a result, the Ministry of Finance must find alternate buyers to absorb the supply of JGBs. Additionally, there are proposals to make retail bonds eligible for the Nippon Individual Savings Account (NISA) tax-exempt investment system.