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2025-12-03 14:12:33
[UK and Japan Adjust Debt Issuance Structures to Shift Towards Short-Term Borrowing; Analysts Warn of Interest Rate Volatility Risks] 1. Data shows that the UK and Japanese governments are responding to market changes by increasing short-term borrowing to adjust their debt financing structures. While this shift helps reduce current interest payments, it also makes both countries more vulnerable to future interest rate fluctuations when rolling over their debt. 2. This year, the UK has drastically reduced its long-term bond issuance to a historic low and is considering expanding its ultra-short-term note market. Japan, after a sell-off in long-term government bonds, has also begun to explore increasing short-term debt issuance. Evelyne, a strategist at Mizuho Securities, points out that the risk of such a strategy is that government interest payments could increase sharply if interest rates rise in the future. 3. This trend reflects persistent inflationary pressures and a structural shift in demand from traditional long-term government bond buyers. For example, the UK previously relied on long-term investors such as pension funds to purchase long-term bonds to match its liabilities, resulting in a significantly longer average maturity for UK government bonds compared to other developed countries. However, many of these pension plans are now shrinking or ending.
