How the MOF Determines Issuance
Understanding how the Ministry of Finance decides what bonds to issue, when, and in what amounts
The Ministry of Finance (MOF) officially defines three primary objectives for its debt management policy, as stated in its annual Debt Management Report:
- Ensure stable financing for the government's budget.
- Secure this financing at the lowest possible cost over the long term.
- Maintain a liquid and efficient market for JGBs.
📘 About the Debt Management Report
The classifications and strategies described in this chapter are defined in the Ministry of Finance's annual Debt Management Report, the authoritative source for JGB policy.
Government debt management policies are a group of policies associated with such activities as issuing, offering, trading and redeeming JGBs, with a view that JGBs are to be widely accepted by the national economy.
Fundamental Goal: Our fundamental goal of debt management policy is to achieve stable and smooth financing for our national accounts and to minimize medium-to-long term financing costs.
The Debt Management Report is published annually and provides comprehensive analysis of:
- JGB market trends and issuance plans
- Investor base diversification strategies
- Cost-at-Risk analysis for debt sustainability
- Comparisons with international debt management practices
Types of JGBs by Purpose
The total issuance amount is the sum of bonds issued for different, specific reasons. Legally, JGBs are classified by their purpose into two main groups: Ordinary Bonds (Futsuu Kokusai / 普通国債) and FILP Bonds (Zaitousai / 財投債).
1. Ordinary Bonds (Futsuu Kokusai / 普通国債)
These fund the government's main budget (the "General Account") and are paid back by general tax revenues.
-
Construction Bonds (Kensetsu Kokusai / 建設国債):
Issued to finance public infrastructure projects like roads, bridges, and schools. This is the only type of debt legally permitted by Japan's primary Public Finance Act (Article 4). -
Special Deficit-Financing Bonds (Akaji Kokusai / 赤字国債):
Issued to cover general spending (like social security and defense) when tax revenues aren't enough. Because the Public Finance Act *bans* this, the government must pass a "Special Law" (特例法) every single year to authorize their issuance. -
Refunding Bonds (Karikae-sai / 借換債):
These are not new debt. They are new bonds issued to "roll over" the debt of old bonds that are maturing. This is the largest single category and is how the government refinances its existing debt. -
Other Special Bonds:
For specific national policies, such as Reconstruction Bonds (Fukkou-sai / 復興債) (for the 2011 earthquake), GX Transition Bonds (for green energy projects), and Child Bonds.
📊 Special Bonds in Context (2025Q2)
These special-purpose bonds are policy tools, not market-moving size:
- GX Transition Bonds: ¥3.7 trillion outstanding (0.3% of total debt)
- Reconstruction Bonds: ¥4.6 trillion outstanding (0.3% of total debt)
- Nuclear Damage Compensation: ¥4 trillion outstanding (0.3% of total debt)
For comparison, total outstanding government debt is ¥1332.2 trillion. Each of these special bonds represents less than 0.5% of the total—small but growing as new policies are implemented.
2. FILP Bonds (Zaitousai / 財投債)
These bonds are issued to raise money for the Fiscal Investment and Loan Program (FILP), which is a separate, government-run "investment budget" used to fund public-private entities, government banks, etc.
What's Actually Outstanding in the Market
The classifications above describe why bonds are issued. But what's actually sitting in the market right now? The chart below shows the current composition of Japan's ¥1332.2 trillion outstanding government debt (2025Q2), broken down by the bond types you just learned.
Determining Issuance Amounts (The Math)
Before understanding the planning process, it's important to understand what drives the total issuance amount. The total amount in the Annual JGB Issuance Plan (e.g., ¥176.9 trillion for FY2025) is determined by combining the bond types defined above. Here is the breakdown from the official FY2025 plan:
| Bond Type | Purpose | Amount | % of Total |
|---|---|---|---|
| Refunding Bonds | Refinancing maturing debt | ¥136.2T | 77.0% |
| Special Deficit-Financing Bonds | Cover budget deficit (requires annual special law) | ¥21.9T | 12.4% |
| Construction Bonds | Public infrastructure projects | ¥6.8T | 3.8% |
| FILP Bonds | Fiscal Investment and Loan Program | ¥10T | 5.7% |
| GX Transition Bonds | Green transformation and climate initiatives | ¥0.7T | 0.4% |
| Children Special Bonds | Child and family support policies | ¥1.1T | 0.6% |
| Reconstruction Bonds | Disaster recovery (2011 earthquake) | ¥0.1T | 0.07% |
| Total Issuance | ¥176.9T | 100.0% | |
💡 Why is Refunding the Largest Category?
Japan has ¥1332.2 trillion in outstanding government debt (as of 2025Q2). Each year, a significant portion of this massive accumulated stock matures and must be replaced:
- Average maturity: ~9 years (longer than most developed countries)
- Annual refinancing need: Approximately ¥136 trillion matures each year
- Mechanical, not discretionary: This isn't new borrowing—it's replacing maturing debt to maintain the ¥1332.2T stock
The ¥136.2 trillion Refunding issuance in FY2025 is driven by the existing debt stock, not new policy decisions. This is why Refunding dominates the issuance plan—it's the cost of servicing a debt accumulated over decades.
The Issuance Planning Process
The MOF's strategy is not decided in secret. It is a formal, public, year-long process with clearly defined participants and timelines. Here is the general calendar:
JGB Issuance Planning Timeline
Fiscal Year: April – March
Economic Forecasting
Q1: April – JuneAt the start of the fiscal year, the Cabinet Office and Ministry of Finance project the coming year's economic conditions—GDP growth, tax revenue estimates, and spending requirements.
Budget Formation
Q2: July – SeptemberMinistries submit budget requests, and the MOF consolidates these into a draft budget. This draft estimates the fiscal gap between expected revenues and planned expenditures.
Debt Management Report Publication
Q3: October – DecemberThe MOF issues the Debt Management Report (DMR), outlining planned JGB issuance amounts by type (refunding, deficit-financing, etc.) and maturity distribution for the upcoming fiscal year.
Diet Approval
Q4: January – MarchThe Diet deliberates and approves the final budget, including the Special Public Bonds Law. This approval authorizes the planned JGB issuance to fund the fiscal deficit and refinance maturing debt.
Next Fiscal Year Begins
April 1With budget and issuance plans approved, the government can issue JGBs as scheduled. The Bank of Japan (BOJ) may conduct market operations that interact with JGB issuance—though these operations are not formally coordinated with MOF's issuance decisions.
References
- Japan Ministry of Finance. "Debt Management Report 2025." Available at: https://www.mof.go.jp/english/policy/jgbs/publication/debt_management_report/2025/index.html. June 2025.
- Japan Ministry of Finance. "Highlights of FY2025 Debt Management Policy (JGB Issuance Plan)." Available at: https://www.mof.go.jp/english/policy/jgbs/debt_management/plan/highlight241227.pdf. December 27, 2024.
- Japan Ministry of Finance. "JGB Issuance Plan for FY2025." Available at: https://www.mof.go.jp/english/policy/jgbs/debt_management/plan/20241227.html. December 27, 2024.