Japan's Government Bond Yields Rise, Luring Investors Back

Japanese government bond yields have surged in recent months, making them worth owning again after years of low returns. Domestic asset managers are rushing to create investment trusts that allow ordinary investors to participate.

The Mitsubishi UFJ Asset Management fund, set to launch in September, will focus on long-term JGBs with maturities of 20 years issued during the Bank of Japan's period of ultra-loose monetary policy. Prices for these bonds have fallen sharply, driving yields higher, but buyers who hold them until maturity receive 100% of the face value.

The main avenue for Japanese households to invest in government bonds has traditionally been retail JGBs with maturities of 3, 5, and 10 years. However, asset managers are now creating investment trusts focused on super-long bonds, including those with 30-year maturities that trade at a near 4% yield.