Japanese Government Bonds

Japanese Government Bonds (JGB) are bonds that are sold by the Japanese government as a tool to borrow money. They work similarly to the bonds sold by the United States government. You purchase Japanese Government Bonds and the Japanese government uses the money and pays that money back with interest when the bonds have reached maturity. JGBs are very liquid and marketable. You can trade Japanese Government Bonds on foreign exchange market.

The Japanese government pays interest on the bonds every 6 months; the principal of the Japanese Government Bonds are secured at maturity. JGBs mature from 2 to 40 years. The 2, 5, 10 and 20 year maturity bonds are issued by the government every month. The 30 year bonds are offered every other month, and the 40 year bonds are issued every quarter year. The Interest rate being paid on Japanese Government Bonds is 1.485 percent as of November 11, 2009. Government bonds help to pay off the national debt. When you purchase Japanese Government Bonds you are helping the Japanese economy.

The nominal coupon rate (interest rate) of the Japanese Government Bond is set at a fixed rate at the time of issue according to its market value. The fixed rate will remain in place until the bond matures. Since the Japanese Government Bonds are a financial product, they can be traded at any time on the market. You don't have to hold the bonds until they mature. Depending on the market, JGBs may be sold at a higher or lower price than the bond was purchased for.

The market for Japanese Government Bonds often depends on the rise and falls in the U.S. Treasuries. The newest Japanese Government Bond is the 304th with a 10 year maturity, and this bond is in great demand in the repo market. On the repo market one person wants to liquidate JGBs for cash. You sell your bond for cash, and you agree to buy the bond back at a later date that is agreed upon. It works like borrowing money and the bond is held as collateral.