TOKYO - Japan is considering cutting its inflation-linked government bond buybacks as investor demand surges amid rising inflation expectations.
Market-based inflation expectations - measured by the break-even inflation rate - topped 1.9% in late January for the first time, boosting investor appetite for these securities.
Inflation-linked bonds adjust principal and interest with consumer price growth, offering built-in inflation protection.
The Finance Ministry plans 15 billion yen buybacks for April and June - down from 20 billion yen each month in January through March.
Issuance volume remains unchanged at 250 billion yen for May, with a final decision expected later this month.
Japan reintroduced these bonds in 2013 after halting them in 2008 amid deflationary risks. The ministry has since supported market development through principal guarantees and regular buybacks.
Economists note supply-demand dynamics have turned positive for the first time in two quarters - yet a broad-based demand recovery remains incomplete.