Japan may boost debt sales 3.2% next year

Japan will probably increase sales of government bonds by 3.2 percent in the next fiscal year to fund the world’s biggest debt burden, according to Ministry of Finance officials.

Debt issuance may climb to about 175 trillion yen ($2.2 trillion) in the year starting in April, the officials, who declined to be identified, told reporters in Tokyo today. Amounts being sold to investors such as banks and life insurers weren’t provided.

Japanese dealers repeated there’s scope for the government to increase issuance of 20-year bonds, the officials said after meetings with the nation’s 25 primary dealers and money managers. Most participants also said the market can absorb more debt maturing in less than 20 years, including two-, five- and 10- year securities, said the officials, who spoke on condition of anonymity. The ministry said last December that sales in the year underway would be 169.6 trillion yen.

Market participants said yields on government securities will probably stay low as investors keep buying the instruments as a refuge from the European debt crisis, according to the officials. Some dealers and investors said Japan should enhance fiscal discipline to maintain sustainable demand for Japanese government bonds, known as JGBs, the officials said.

Japan’s 10-year bond yield fell one basis point to 0.97 percent today, after earlier touching 0.965 percent, the lowest since Nov. 24, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker.