Impact of Growth in JGBs for Individuals on Bank Earnings and JGB Market

Our joint analysis with the Fixed Income Strategy team suggests that growth in JGBs for Individuals would affect banks' funding costs and JGB investments through deposit quality and available liquidity, rather than immediately triggering deposit outflows. Major banks with ample excess liquidity are better positioned to respond, while competition for deposits could widen earnings disparities among regional banks. Household holdings of retail JGBs could rise from 20 trillion yen currently to around 50 trillion yen by FY2030 if interest rates remain at current levels, and demand could increase further if retail JGBs become eligible for NISA or receive preferential inheritance tax treatment. However, household demand is unlikely to fully absorb the increase in JGB supply; the reduction in the 10-year term premium is estimated at just 2-7bp, with upward pressure from declining BOJ holdings and new issuance expected to dominate. Growth in retail JGBs is therefore likely to have a greater imp