Japanese government bonds, after years of offering investors almost no return, are becoming attractive again, and domestic asset managers are racing to give retail investors access. According to Sina Finance, Mitsubishi UFJ Asset Management has joined Daiwa Asset Management and Amova Asset Management in selling investment trusts focused on super-long bonds.

The funds each remain relatively small, with no more than 300 million yen in assets, but their emergence suggests Japan's bond market, long dominated by the Bank of Japan, is becoming active again. Takayuki Yagi of Mitsubishi UFJ said that holding Japanese government bonds had until recently meant losing money, but that combining Japanese bonds and stocks now offers a textbook diversification effect.

Mitsubishi UFJ Asset Fund plans to launch in September and will focus on 20-year low-coupon Japanese government bonds issued during the Bank of Japan's ultra-loose monetary policy. As the Bank of Japan has continued normalizing policy, prices of these bonds have fallen sharply and yields have risen significantly. If held to maturity, they will be redeemed at face value, making discounted purchases potentially profitable.

Shinichi Sawamura, general manager of SBI Securities' fixed-income division, said Japan's yield curve is the steepest among major countries, but retail investors have not yet had the chance to profit from it. According to Sina Finance, his company has been selling Japanese government bonds with maturities of 10 to 40 years since 2021.

Takafumi Yamawaki, head of Japan rates research at JPMorgan Securities Japan, said finding buyers for Japanese government bonds is crucial for the government. He said the Bank of Japan is expected to reduce its Japanese government bond holdings by 48 trillion yen in this fiscal year and keep cutting at that pace, while the government is expected to increase bond issuance by 15 trillion yen this year to fund large-scale stimulus and tax cuts.