Japan reportedly to issue new floating-rate bonds to help investors if BOJ hikes rates

The Japan Ministry of Finance is said to be looking to introduce a new type of floating-rate bond in the market, in order to help investors mitigate the risks from rising bond yields. This comes as Japanese officials are gearing up for more rate hikes by the BOJ.

A combination of the BOJ tapering bond purchases and hiking rates further would likely entail higher yields i.e. lower bond prices. So, the new note is said to have a short-term duration and a floating interest rate that would rise alongside market interest rates.

That will at least help cover some of the losses that investors might face if the BOJ does decide to hikes rates further down the road. In other words, it is mostly trying to make Japanese bonds more attractive to investors still.

The sources say that the government will aim to issue the new note from fiscal year 2026 with two-year and five-year bonds seen as among the possible options.

This article was written by Justin Low at www.forexlive.com.