Japan's finance minister warms to idea of issuing 50-year bonds

MACROECONOMICS - TOKYO. Japan would consider issuing 50-year government bonds in the future, Finance Minister Taro Aso said on Friday, warming to an idea once shunned by his ministry because of concerns that cheap funding could spur wasteful spending.

Aso's remark comes just days after Bank of Japan (BOJ) Governor Haruhiko Kuroda said 50-year bonds could help prevent excessive falls in super-long yields that hurt the investment returns of life insurers and pension funds.

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Aso said there was no immediate need to issue 50-year bonds as demand for bonds with other maturities remained strong. The ministry currently issues super-long bonds ranging from 20 to 40 years.

"It's true there are various views such as that 50-year bonds would be good for an increase in interest rates, but we are not facing such a situation where demand is strong and we have difficulty absorbing government bonds," Aso told reporters after a cabinet meeting, when asked about Kuroda's remarks.

"I think such a topic will be one of the issues to consider in future, but that does not mean we will issue 50-year bonds immediately."

Aso's comments are a departure from the stance of his ministry, which told a meeting of primary bond dealers in September that the issue was not brought up for discussion. The ministry has been wary of issuing 50-year bonds, even though it could lock in low borrowing costs under the BOJ's ultra-low interest rate policy.

Kuroda, meanwhile, has repeatedly said if the BOJ were to ease, it would seek to push down short- to medium-term borrowing costs without causing an excessive decline in super-long yields.

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One way to keep long-term yields from falling too much could be for the government to issue more super-long bonds, Kuroda told reporters earlier this week.

In September, U.S. Treasury Secretary Steven Mnuchin said the United States may issue 100-year bonds if a bid to issue 50- year bonds is successful.

"If there is proper demand we will issue 50-year bonds," Mnuchin said, adding that if those are successful, the United States "will consider" 100-year bonds.