JGB market issuance seen at 147 trillion yen

Japan is expected to issue 147 trillion yen ($1.8 trillion) in government bonds to the market next fiscal year, a Reuters poll showed, another record amount for the most indebted industrialised nation.
But the poll also showed that Japan is expected to keep new JGB issuance steady at 44 trillion yen in the year from April, matching the government's self-imposed cap as it grapples with debt about twice the size of the $5 trillion economy.
Market issuance worth 147 trillion yen would mark a 1.9 percent increase in fiscal 2011/12. That would be slower than the 4.9 percent rise in fiscal 2010/11, for which Japan is issuing 144.3 trillion yen to the market.
The market issuance, or calendar base, forecast ranged from 143.7 trillion yen to 147.9 trillion yen.
Analysts say the increase in the calendar base amount, of chief interest to bond investors, could be limited to a few trillion yen in fiscal 2011/12 by raising the amount of JGBs the Bank of Japan underwrites.
It could also be limited if the Ministry of Finance increases "front loaded" debt issuance. Front loading involves selling in advance bonds intended for issuance in the coming fiscal year, which can happen if the government does not need to use all the supply planned for the current year.
The Reuters poll of 12 Japanese government bond market strategists and analysts, conducted from December 9 to December 14, also showed that market players expect new JGB issuance to total 44.3 trillion yen in fiscal 2011/12.
That would match the new debt issuance amount for the current fiscal 2010/11, a target the ruling Democratic Party of Japan has imposed on itself as it compiles the budget for next fiscal year.
Market players expect tax revenues in fiscal 2011/12 to rise to around 41 trillion yen, an increase of about 4 trillion yen from this fiscal year's initial budget estimate, as the economy has recovered from the last recession. This may help the government achieve its self-imposed cap on new bond issuance for fiscal 2011/12.
Still, to meet the new bond target, the government needs to tap non-tax revenues worth several trillions of yen, such as surplus funds raised from the country's foreign reserves.
The strategists polled expect the superlong 30-year and 40-year maturities to bear much of the supply increase next fiscal year. Eleven out of the 12 polled expect quarterly issuance of 40-year debt to be raised by 100 billion yen to 400 billion yen in fiscal 2011/12.
A majority of the respondents also see the 30-years, now sold eight times a year, raised by 100 billion to 200 billion yen per sale, from the current 600 billion yen.