With Zero Interest Rates Gone, Japanese Retail Investors Flock to Government Bonds... Online Brokerage Sales Quadruple

Nikkei Reports Sales Aggregated by Four Major Online Brokerages

It has been observed that young Japanese investors are turning their attention to individual government bonds. This shift appears to be influenced by rising interest rates, which have made returns from personal government bonds more attractive than bank deposits.

According to the Nihon Keizai Shimbun (Nikkei) on September 7, the total sales of government bonds for individual investors through four major online brokerages—SBI, Rakuten, Mitsubishi UFJ e-Smart Securities, and Monex—from January to June this year exceeded 540 billion yen (4.6525 trillion won). This figure has increased 4.4 times compared to the same period last year.

Considering the country as a whole, the issuance of government bonds for individual investors in Japan has significantly increased. According to the Ministry of Finance, the amount issued in the first half of this year grew 1.6 times from a year earlier, reaching 4.5228 trillion yen (38.9679 trillion won). Nikkei emphasized that the rapid growth in sales through online brokerages has far outpaced face-to-face sales at traditional banks or securities firms, with online brokerages’ share exceeding 10% of the market total.

On the 3rd, an employee is organizing Japanese yen and US dollars at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. Photo by Yonhap News.

The age of investors is also declining. Citing an internal source at SBI Securities, Nikkei analyzed that “a few years ago, the majority of government bond investors were in their 40s to 60s, but now 20% of buyers are in their 30s or younger.” The report also noted, “Many young investors make small purchases at a time, often in increments of tens of thousands of yen.”

The growing adoption of the new small-investment tax-exempt account (NISA) scheme also appears to have contributed to this trend. The government of Fumio Kishida, promoting “a shift from savings to investment,” has reinforced various tax benefits such as making the tax exemption period unlimited and greatly increasing the annual contribution limit. Nikkei assessed, “Beginner investors who started with NISA are now diversifying their portfolios by adding bonds, which also appears to be a major factor.”

Furthermore, the Bank of Japan’s (BOJ) interest rate hike policy seems to be enhancing the appeal of government bond investments. The BOJ lifted its negative interest rate policy in 2024 and has subsequently focused on raising policy rates in stages. As market interest rates have risen in tandem, so too have the yields on individual government bonds.

According to Nikkei, as of September 3, the interest rate for newly issued 10-year floating-rate personal government bonds is 1.95% per annum, which is 0.7 percentage points higher than the 1.25% rate for 10-year time deposits at major Japanese banks. This marks a significant jump from the low-0.1% level at the start of 2023. Recently, Nikkei reported, more investors are opting for 5-year fixed-rate bonds, which offer even higher yields.

As a result, idle funds previously tied up in banks—such as deposits—are also flowing into government bonds. Multiple online brokerage sources told Nikkei that “most people investing in personal government bonds are utilizing dormant funds that had been held in banks or similar institutions.”

Government bonds for individual investors generate little profit for brokerages due to their low sales commissions. Nevertheless, brokerages are prioritizing these sales, viewing it as a way to prevent clients from moving to competitors if they do not offer such products. SBI Securities explained to Nikkei, “It is a strength that we have accumulated a large pool of individual bond buyers even in the business of underwriting corporate bond issuances.” Rakuten Securities also plans to begin offering ultra-long-term bonds, such as 30-year issues, to retail investors in the second half of this year.

This content was produced with the assistance of AI translation services.