Japan plans to trim inflation-linked bond issuance on softer price outlook - sourcesJapan plans to trim inflation-linked bond issuance on softer price outlook - sources
Illustration photo of a Japan Yen note

TOKYO (Reuters) – Japan plans to cut the amount of inflation-linked government bonds it sells to the market next month to the lowest level in seven years, government officials said on Tuesday, as slumping oil costs and the economic fallout from the coronavirus pandemic stoke fears of deflation.

The Ministry of Finance (MOF) originally planned to issue 300 billion yen ($2.8 billion) worth of inflation-linked bonds in a quarterly auction scheduled for May 8.

Given prospects of weaker price growth, the MOF is expected to trim the amount to 200 billion yen, which would be the lowest amount of issuance since 2013, two government officials with direct knowledge of the plan told Reuters.

The ministry will make an official decision by the end of this month, after consulting with investors such as commercial banks and securities firms on Thursday, the officials said.

The officials spoke on condition of anonymity as they were not authorised to speak publicly.

Inflation-linked bonds are securities designed to help protect investors from inflation. Principal and interest payments rise and fall with the rate of inflation. They become less attractive for investors when prospects of future price rises diminish.

(Reporting by Takaya Yamaguchi, Writing by Leika Kihara; Editing by Jacqueline Wong)