What are Japanese Government Bonds?
Basic concepts and foundational understanding of Japanese Government Bonds
The Basic Concept
I will assume you already have basic financial instrument knowledge and read the news daily. Japanese Government Bonds (JGBs) are debt securities issued by the government of Japan. In other words, it is the government's means to borrow money from you, who is the investor throughout this app. When you buy a JGB, you are effectively lending money to the government.
In return, the government promises to pay you two things:
- Regular interest payments (coupons): Fixed semi-annual payments based on the bond's coupon rate.
- Face value at maturity: The bond's face value (also called par value), paid back when the bond matures.
Important distinction: Note that face value is NOT the same as the purchasing price. The amount you initially invest will not always equal the amount you receive at maturity. We will cover details later, but for now, understand that coupon and maturity payments are the two key components of what the investor receives (also collectively referred to as cash flow) and is calculated on face value, not the price you paid.
Further Reading
Official Sources:
References
- Japan Ministry of Finance. "About JGBs." Debt Management - Guide to JGBs. Available at: https://www.mof.go.jp/english/policy/jgbs/debt_management/guide.htm. Accessed: October 21, 2025.
- Bank of Japan. "Functions and Operations of the Bank of Japan." Available at: https://www.boj.or.jp/en/about/outline/data/fobojall.pdf. 2005.
- "The Bank of Japan Act." Japanese Law Translation. Last amended 2019. Available at: https://www.japaneselawtranslation.go.jp/en/laws/view/3788/en. See Article 35 ("Handling of Treasury Money") and Article 36 ("Handling of National Government Affairs").