Title: Japanese Government Bond (JGB) Definition
Headings: Japanese Government Bond (JGB)
Japanese Government Bond (JGB)
What Is a Japanese Government Bonds (JGB)?
Understanding Japanese Government Bonds (JGBs)
Special Considerations
Japanese Government Bonds (JGBs) vs. U.S. Treasuries

Content: To maintain the yield on 10-year JGBs at zero, a rise in the yield of these bonds triggers a buy action from the BoJ.
As of 2019, the central bank owns over 40% of Japanese government bonds. There is an inverse relationship between interest rates and bond prices, which are dictated by supply and demand in the markets. Heavy buying of JGBs increases demand for the bonds, which leads to an increase in the price of the bonds. The price increase forces down the bond yield, an essential element of the central bank’s ultra-loose yield curve control (YCC) policy, which was designed to help increase the profits that Japanese banks could earn from lending money. The Bank of Japan implemented the yield curve control in 2016 in an effort to keep the yield on its 10-year JGB at zero and to steepen the yield curve. The yield curve steepens when the spread between short-term interest rates, which are negative in Japan, and long term rates increase. The wider spread in interest rates creates opportunities to arbitrage profits, which is advantageous for banks in Japan. Japanese Government Bonds (JGBs) vs. U.S. Treasuries
Japanese government bonds (JGBs) are very much like U.S. Treasury securities. They are fully backed by the Japanese government, making them a very popular investment among low-risk investors and a useful investment among high-risk investors as a way to balance the risk factor of their portfolios. Like U.S. savings bonds, they have high levels of credit and liquidity, which further adds to their popularity.