Japan
The Bank of Japan still holds close to half of all JGBs after a decade of yield curve control and negative rates, which ended in March 2024, and it is shrinking purchases only slowly while keeping its policy rate at 1.25 percent. Public pension money, a state postal bank, bank capital and liquidity rules that favor JGBs, and a large bond-funded state lending program add structural demand for government debt.
- 13 in force
- 2 enacted
- 1 proposed or under discussion
Measures as of
How the index is built
Each segment is what one category of rules, or the market pillar, adds to the index. The full bar is 100.
- Captive demand 10.4
- Central bank financing 10.2
- Capital controls 9.6
- Rate caps 5.6
- Prudential sovereign bias 5.0
- Directed credit 4.0
- Tax incentives 4.8
- Real asset restrictions 1.2
- Transaction taxes 0.0
- Market pillar 14.1
Index = 80% × rules (63.5) + 20% × market (70.7) = 64.9
The method in plain words
- Rules pillar (0–100). Each of the 9 categories can add up to its weight (the weights sum to 100). A category's intensity grows with every in-force measure in it: one measure counts by its severity factor (0.25 for severity 1, 0.5 for 2, 0.8 for 3), and each further measure closes part of the remaining gap, so breadth adds with diminishing returns: two severity-3 measures give 96%.
- Market pillar (0–100). The average of the market readings below: how negative the real policy rate is, and how much of the government's debt is held by its own central bank and banks.
- Index. 80% rules + 20% market when market data exists, otherwise rules alone. Laws passed but not yet applying count only in the outlook; proposals never count.
The 9 categories
Weight = the most points a category can add to the rules pillar. Intensity = how much of that weight the in-force measures fill. Open a category to see the measures counted; “What is this?” shows the instruments behind it, worldwide and in history.
- 1 proposed not countedWeight 16Intensity 81%Points 10.4
Mandated holdings of government debt by pension funds, insurers or banks. What is this? →
Captive demand: measures counted in the index Measure counted Severity Factor Points 2 of 3 0.5 4.3 2 of 3 0.5 4.3 1 of 3 0.25 1.8 - Weight 16Intensity 80%Points 10.2
Central bank purchases of government debt, yield curve control, direct monetary financing. What is this? →
Central bank financing: measures counted in the index Measure counted Severity Factor Points 3 of 3 0.8 10.2 - 1 enacted not countedWeight 16Intensity 75%Points 9.6 → 11.2 once enacted laws apply
Limits on moving money abroad, outbound investment limits, FX controls. What is this? →
Capital controls: measures counted in the index Measure counted Severity Factor Points 2 of 3 0.5 4.8 2 of 3 0.5 4.8 - Weight 14Intensity 50%Points 5.6
Caps or ceilings on deposit or lending rates, and administered interest rates. What is this? →
Rate caps: measures counted in the index Measure counted Severity Factor Points 2 of 3 0.5 5.6 - Weight 10Intensity 63%Points 5.0
Prudential rules that favor sovereign debt (zero risk weights, liquidity-buffer rules, leverage-ratio exemptions). What is this? →
Prudential sovereign bias: measures counted in the index Measure counted Severity Factor Points 2 of 3 0.5 3.5 1 of 3 0.25 1.5 - Weight 10Intensity 50%Points 4.0
State-directed lending, credit guidance, and mandates to invest domestically or in state priorities. What is this? →
Directed credit: measures counted in the index Measure counted Severity Factor Points 2 of 3 0.5 4.0 - 1 enacted not countedWeight 7Intensity 85%Points 4.8 → 5.0 once enacted laws apply
Tax privileges for government bonds, or tax penalties on competing assets. What is this? →
Tax incentives: measures counted in the index Measure counted Severity Factor Points 3 of 3 0.8 4.0 1 of 3 0.25 0.7 - Weight 6Intensity 25%Points 1.2
Rent controls, property curbs, and limits on owning gold, cash or crypto. What is this? →
Real asset restrictions: measures counted in the index Measure counted Severity Factor Points 1 of 3 0.25 1.2 - Transaction taxesWeight 5Intensity 0%Points 0.0
Financial transaction taxes, stamp duties and similar levies on non-government assets. No in-force measures here. What is this? →
Market pillar 70.7 / 100
The average of the readings that have data, worth 20% of the index (14.1 points here).
Real policy rate
41.4 / 100-0.9% · Jul 2026
Policy rate minus inflation. A real rate of +2% or more scores 0; −5% or less scores 100; in between it scales in a straight line. Savers lose most when it is deeply negative.
Policy rate 1% minus consumer price inflation 1.898% (year on year), 2026-07.
Debt held by the central bank and domestic banks
100.0 / 10060.2% of government debt · 2025-Q4
Share of government debt held by the domestic central bank and domestic banks. 0% scores 0; 60% or more scores 100; in between it scales in a straight line.
Central bank 41.9% + domestic banks 18.27% of general government debt, 2025-Q4.
Indicators
Measured data from international sources, alongside the rules above. Real rates below zero mean savers lose purchasing power.
Policy rate, inflation and real rate
Who holds government debt
The liquidation effect follows Reinhart and Sbrancia: with a negative real rate, about −(real rate × debt) of GDP moves from savers to the state each year. It uses the policy rate, so treat it as a rough guide. Sources: BIS, BIS central bank policy rates; BIS consumer prices; IMF, IMF DataMapper: World Economic Outlook (October 2026); Fiscal Monitor (October 2026); Menzie D. Chinn and Hiro Ito, The Chinn-Ito Index (KAOPEN): a de jure measure of financial openness; IMF, Sovereign Debt Investor Base for Advanced Economies / for Emerging Markets and Developing Economies (Arslanalp and Tsuda).
Measures
Every measure tracked here, with its legal basis and sources. Only in-force measures count in the index.
In force (13)
Administered policy rate kept below inflation-neutral levels
Adds 5.6 points to the index
The Bank of Japan guides the overnight call rate to around 1.25 percent and pays 1.25 percent on banks' current account balances above required reserves, effective 24 September 2026. The Bank states that real interest rates remain low and financial conditions accommodative.
Why it counts: With the policy rate set below underlying inflation of close to 2 percent, deposit and short-term bond yields stay low in real terms, eroding savers' returns while lowering the cost of servicing public debt.
Legal basis Bank of Japan, Change in the Guideline for Money Market Operations (Monetary Policy Meeting decision), Items 1-2 and footnotes 1-2 and 2 more
Bank of Japan, Change in the Guideline for Money Market Operations (Monetary Policy Meeting decision), Items 1-2 and footnotes 1-2Primary source
“The interest rate applied to the complementary deposit facility (the interest rate applied to current account balances held by financial institutions at the Bank, excluding required reserve balances) will be 1.25 percent.”
Bank of Japan, Change in the Guideline for Money Market Operations, Item 4Primary source
“Japan's financial conditions have been accommodative. Real interest rates have remained at low levels, mainly in the short- to medium-term zone.”
日本銀行法 (Bank of Japan Act, Act No. 89 of 1997), Article 33(1)(iii); Article 15(1)(iv)Primary source
“商業手形その他の手形（日本銀行の振出しに係るものを含む。）、国債その他の債券又は電子記録債権の売買”
Economic value-based solvency ratio for insurers
Adds 1.5 points to the index
From the fiscal year ending 31 March 2026, insurers must meet an economic value-based solvency ratio of at least 100 percent, replacing the old solvency margin ratio. Assets and liabilities are valued on a market-consistent basis, so interest-rate mismatches now cost capital.
Why it counts: Life insurers with long-dated liabilities reduce capital charges by lengthening asset duration, and in yen the main long-duration asset is super-long JGBs.
Legal basis 保険業法施行規則の一部を改正する内閣府令; 保険業法第百三十二条第二項に規定する区分等を定める命令の一部を改正する命令; related FSA notices (経済価値ベースのソルベンシー規制) - FSA announcement of promulgation, ４．公布・適用日等について and 1 more
保険業法施行規則の一部を改正する内閣府令; 保険業法第百三十二条第二項に規定する区分等を定める命令の一部を改正する命令; related FSA notices (経済価値ベースのソルベンシー規制) - FSA announcement of promulgation, ４．公布・適用日等についてPrimary source
“本日付で公布します。また、法令等の適用日は令和８年（2026年）３月31日です。”
金融庁「経済価値ベースのソルベンシー規制の概要」(2026年7月), 第１の柱 - 監督介入と検証の枠組みPrimary source
“ESRが100%を下回った場合は、早期是正措置制度の対象*として、ESR低下の要因等の具体的な状況等”
Public pension reserve fund target allocation to domestic bonds
Adds 4.3 points to the index
The Government Pension Investment Fund's policy asset mix for fiscal 2025 to 2029, effective 1 April 2025, sets a 25 percent target for domestic bonds with a deviation limit of plus or minus 6 percent. Public pensions held 76.6 trillion yen of JGBs in June 2026.
Why it counts: A state-set allocation keeps a quarter of the world's largest pension reserve in domestic bonds, mostly JGBs, giving the government a large and stable buyer.
Legal basis GPIF, Policy Asset Mix for the Fifth Medium-Term Objectives Period - Summary, Target allocation and deviation limits (Fifth Period)
GPIF, Policy Asset Mix for the Fifth Medium-Term Objectives Period - Summary, Target allocation and deviation limits (Fifth Period)Primary source
“The new policy asset mix was decided after six rounds of discussions at the Board of Governors, and will be effective on April 1, 2025.”
Bank of Japan JGB holdings and slow purchase taper
Adds 10.2 points to the index
The Bank of Japan held 470.0 trillion yen of JGBs in June 2026, 46.7 percent of the total. Under its June 2026 plan it cuts monthly purchases by about 200 billion yen a quarter to about 2 trillion yen from April 2027, and it can step up purchases or run fixed-rate operations if long-term rates rise rapidly.
Why it counts: The central bank absorbs a large share of government debt and stands ready to cap sharp rises in yields, which keeps long-term borrowing costs, and the returns savers earn on bonds, lower than a free market would set.
Legal basis Bank of Japan, Plan for the Outright Purchases of Japanese Government Bonds (Monetary Policy Meeting decision), Items 1-2 and Attachment and 2 more
Bank of Japan, Plan for the Outright Purchases of Japanese Government Bonds (Monetary Policy Meeting decision), Items 1-2 and AttachmentPrimary source
“The Bank will reduce the planned amount of its monthly purchases of JGBs by, in principle, about 200 billion yen each calendar quarter until January-March 2027.”
Bank of Japan, Statement on Monetary Policy (purchase-reduction plan), Item 2Primary source
“The amount will be cut down by about 400 billion yen each calendar quarter in principle (see Annex).”
日本銀行法 (Bank of Japan Act, Act No. 89 of 1997), Article 33(1)(iii); Article 15(1)(iv)Primary source
“商業手形その他の手形（日本銀行の振出しに係るものを含む。）、国債その他の債券又は電子記録債権の売買”
Stablecoins limited to banks, fund transfer firms and trust companies; reserves in deposits and JGBs
Adds 4.3 points to the index
Under the 2022 amendment to the Payment Services Act, in force since 1 June 2023, fiat-backed 'electronic payment instruments' may be issued only by banks, registered fund transfer service providers or trust companies, and intermediaries need registration. Trust-type stablecoins originally had to keep all backing money in demand deposits; from 1 June 2026 the 2025 amendment lets up to 50% of the issued amount be invested in JGBs and time deposits without principal loss. The first yen stablecoin, JPYC, was issued in October 2025 by a registered fund transfer service provider.
Why it counts: Stablecoin reserves have to sit in Japanese bank deposits or, up to a cap, in Japanese government bonds, so growth in yen stablecoins becomes new demand for bank funding and JGBs rather than a way around them.
Legal basis Payment Services Act (Act No. 59 of 2009, as amended by Act No. 66 of 2025), Art. 2(9) definition of specified trust beneficiary interest and 4 more
Payment Services Act (Act No. 59 of 2009, as amended by Act No. 66 of 2025), Art. 2(9) definition of specified trust beneficiary interestPrimary source
“当該金銭の総額のうち当該預貯金により管理する額以外の額を内閣府令で定める国債証券その他の内閣府令で定める債券”
Outline of the 2025 PSA amendment bill, Flexibility in managing backing assets of trust-type stablecoinsPrimary source
“発行額の50％を上限に、元本を毀損しない形で、国債及び定期預金による運用を認める。”
FSA press release: Cabinet Orders for the 2025 PSA amendment, Main contents and effective datePrimary source
“特定信託受益権の裏付け資産につき、一定の国債及び中途解約が認められる定期預貯金による運用を認める”
Outline of the 2022 PSA amendment bill (Act No. 61 of 2022), Electronic payment instrumentsPrimary source
“電子決済手段等の発行者（銀行・信託会社等）と利用者との間に立ち”
FSA press release: Cabinet Orders and Ordinances for the 2022 PSA amendment, 2. Promulgation and effective datePrimary source
“本件の政令は、令和５年５月23日（火曜）に閣議決定、本日公布されており、令和５年６月１日（木曜）から施行されます。”
Sources
- FSA: Outline of the 2022 PSA amendment bill (electronic payment instruments)
- FSA: Outline of the 2025 PSA amendment bill
- FSA: Promulgation of Cabinet Orders for the 2025 PSA amendment (22 May 2026)
- FSA: Results of public comment and promulgation for the 2022 PSA amendment (26 May 2023)
- Impress Watch: JPYC yen stablecoin issuance starts (28 Oct 2025)
Foreign stablecoins: equivalence test and holding/transfer cap at type-2 fund transfer level
Adds 4.8 points to the index
Registered electronic payment instrument intermediaries may handle foreign-issued stablecoins (e.g. USDC) only if the issuer is licensed and supervised under equivalent foreign law, reserves are held and audited under equivalent rules, and the issuer can freeze transactions linked to crime. For such foreign stablecoins the intermediary must keep the amount it holds and transfers for each user at the same level as for stablecoins issued by type-2 fund transfer firms, whose transfers are capped at 1 million yen.
Why it counts: Residents can hold and move dollar stablecoins through domestic intermediaries only in small amounts, so foreign stablecoins cannot work as a large-scale way out of yen deposits.
Legal basis Cabinet Office Ordinance on Electronic Payment Instruments Exchange Service Providers (Cabinet Office Ordinance No. 48 of 2023), Art. 30(1)(vi)(b) and 2 more
Cabinet Office Ordinance on Electronic Payment Instruments Exchange Service Providers (Cabinet Office Ordinance No. 48 of 2023), Art. 30(1)(vi)(b)Primary source
“第二種資金移動業に係るものに限る。）を取り扱う場合と同等の水準となることを確保するために必要な措置”
Cabinet Office Ordinance on Electronic Payment Instruments Exchange Service Providers (Cabinet Office Ordinance No. 48 of 2023), Art. 30(1)(v) eligibility of foreign electronic payment instrumentsPrimary source
“支障を及ぼすおそれがあると認められる電子決済手段を取り扱わないために必要な措置”
Order for Enforcement of the Payment Services Act, Art. 12-2(1) (ceiling for type-2 fund transfer business)Primary source
“法第三十六条の二第二項に規定する少額として政令で定める額は、百万円に相当する額とする。”
Sources
- e-Gov: Cabinet Office Ordinance on Electronic Payment Instruments Exchange Service Providers
- e-Gov: Order for Enforcement of the Payment Services Act
- FSA: Results of public comment and promulgation for the 2022 PSA amendment (26 May 2023)
- FSA: responses to public comments on the foreign stablecoin cap (26 May 2023)
Crypto investment trusts and ETFs blocked; planned opening tied to the FIEA reform
Adds 1.2 points to the index
Japanese investment trusts are meant to invest mainly in 'specified assets', and crypto is not one. On 27 December 2019 the FSA amended its supervisory guidelines to say that creating or selling investment trusts whose investment target is non-specified assets is not appropriate, citing the view that crypto investment encourages speculation. In its responses to public comments the FSA said crypto ETFs that are investment trusts can no longer be created or sold in Japan, and funds investing in foreign crypto ETFs are generally caught too. The FY2026 tax reform outline assumes a planned amendment to the Investment Trust Act Enforcement Order that would bring investment trusts investing in specified crypto assets under the 20% securities tax; that amendment has not been made.
Why it counts: Savers cannot reach bitcoin through ordinary brokerage, NISA or investment trust channels. They must use direct crypto accounts, where gains are taxed as miscellaneous income at progressive rates until the separate taxation applies.
Legal basis Comprehensive Guidelines for Supervision of Financial Instruments Business Operators (amendment), Notes on investment trusts investing in non-specified assets and 1 more
Comprehensive Guidelines for Supervision of Financial Instruments Business Operators (amendment), Notes on investment trusts investing in non-specified assetsPrimary source
“このような資産に投資する投資信託等の組成・販売には慎重に対応すべきであると考えています”
FY2026 Tax Reform Outline (Reiwa 8), Part 1 (2)(5) premised on amendment of the Investment Trust Act Enforcement OrderPrimary source
“特定暗号資産を投資の対象とする投資信託の受益権を加える。”
Japan Post Bank: capped postal deposits invested in JGBs
Adds 1.8 points to the index
Japan Post Bank's deposit limits are set by Cabinet Ordinance under the Postal Service Privatization Act, currently 13 million yen each for ordinary and time deposits. At 31 March 2026, at fair value, it held 26.5 trillion yen of held-to-maturity JGBs and 10.6 trillion yen of available-for-sale JGBs, against loans of 4.2 trillion yen.
Why it counts: A state-group bank gathers household savings under government-set rules and, with little lending, channels a large part of them into government bonds.
Legal basis 郵政民営化法施行令（平成十七年政令第三百四十二号）(Order for Enforcement of the Postal Service Privatization Act), 第二条第二項第一号イ・ロ (Article 2(2)(i)(a)-(b)) and 1 more
郵政民営化法施行令（平成十七年政令第三百四十二号）(Order for Enforcement of the Postal Service Privatization Act), 第二条第二項第一号イ・ロ (Article 2(2)(i)(a)-(b))Primary source
“千三百万円（当該受入れに係る預金者等の郵便貯金銀行への二号預金があるときは、千三百万円に当該二号預金の額の合計額を加算した額）”
「郵政民営化法施行令の一部を改正する政令」の公布及び施行について (FSA announcement)Primary source
“本日、郵便貯金銀行（ゆうちょ銀行）の通常貯金と定期性貯金の預入限度額をそれぞれ別個に定める「郵政民営化法施行令の一部を改正する政令」が公布され、本年４月１日から施行されることとなりました。”
Crypto gains taxed as miscellaneous income at progressive rates (national 5-45% plus 10% resident tax)
Adds 4.0 points to the index
The National Tax Agency treats profits from selling or using crypto assets as miscellaneous income, as a rule (business income if annual crypto revenue exceeds 3 million yen and books are kept). This income is added to wages and other income and taxed at national income tax rates of 5% to 45% plus a 10% resident tax (4% prefectural, 6% municipal), with the 2.1% reconstruction surtax on the national tax on top. Losses on crypto cannot be set against other income, and crypto margin trading is excluded from the separate taxation that applies to FX.
Why it counts: Holding bitcoin or other crypto instead of yen deposits or JGBs means high-income savers face the top progressive income tax rates on any gain, and losses cannot be set against other income.
Legal basis NTA information: Tax treatment of crypto assets (FAQ), Q2-2 Income classification of crypto transactions (Income Tax Act) and 4 more
NTA information: Tax treatment of crypto assets (FAQ), Q2-2 Income classification of crypto transactions (Income Tax Act)Primary source
“暗号資産取引により生じた利益は、所得税の課税対象になり、原則として雑所得（その他雑所得）に区分されます。”
NTA information: Tax treatment of crypto assets (FAQ), Q2-11 Losses on crypto transactions (Income Tax Act art. 69)Primary source
“雑所得の金額の計算上生じた損失については、給与所得など他の所得から差し引く（通算する）ことはできません。”
Income Tax Act, Art. 89 (tax rates), as summarised in Tax Answer No.2260Primary source
“所得税の税率は、分離課税に対するものなどを除くと、5パーセントから45パーセントの7段階に区分されています。”
Local Tax Act (individual resident tax), Income-based levy ratePrimary source
“所得割の税率は、所得に対して10％（道府県民税が4％、市町村民税が6％）”
NTA information No.4: Calculation of income from virtual currencies, IntroductionPrimary source
“原則として、雑所得に区分され、所得税の確定申告が必要となります。”
Crypto exchange registration and ban on unregistered foreign exchanges soliciting residents
Adds 4.8 points to the index
Since 1 April 2017, only firms registered with the Prime Minister (FSA) may run a crypto-asset exchange business, and an unregistered foreign exchange may not solicit anyone in Japan. The FSA publishes warning letters against offshore platforms serving Japanese residents (e.g. Bybit, MEXC, Bitget, KuCoin, Binance), and in February 2025 it reportedly asked Apple and Google to remove five such apps from the Japanese app stores.
Why it counts: Residents are confined to a small set of domestic licensed exchanges with limited token listings, and the FSA cuts off access to large offshore venues. This narrows the ways savers can move money out of the yen banking system into crypto held abroad.
Legal basis Payment Services Act (Act No. 59 of 2009), Art. 63-2 (registration of crypto-asset exchange service providers) and 3 more
Payment Services Act (Act No. 59 of 2009), Art. 63-2 (registration of crypto-asset exchange service providers)Primary source
“暗号資産交換業は、内閣総理大臣の登録を受けた者でなければ、行ってはならない。”
Payment Services Act (Act No. 59 of 2009), Art. 63-22 (prohibition of solicitation by foreign crypto-asset exchange service providers)Primary source
“登録を受けていない外国暗号資産交換業者は、国内にある者に対して、第二条第十五項各号に掲げる行為の勧誘をしてはならない。”
FSA policy page: Crypto assets and electronic payment instruments, IntroductionPrimary source
“国内で暗号資産と法定通貨との交換サービスを行うには、暗号資産交換業の登録が必要となりました。”
FSA warning: Unregistered crypto-asset exchange business (Bybit Fintech Limited), Warning under FSA administrative guidelines III-1-6(2)(ii)Primary source
“インターネットを通じて、日本居住者を相手方として、暗号資産交換業を行っていたもの”
Zero risk weight and Level 1 liquidity status for yen JGBs
Adds 3.5 points to the index
The FSA applies the national discretion of a 0 percent risk weight to yen-denominated Japanese government bonds, and they count as Level 1 high-quality liquid assets under the liquidity coverage ratio rules that took effect on 31 March 2015.
Why it counts: Banks can hold JGBs with no capital charge and use them to meet liquidity requirements, which builds steady regulatory demand for government debt.
Legal basis 銀行法第十四条の二の規定に基づき、銀行がその保有する資産等に照らし自己資本の充実の状況が適当であるかどうかを判断するための基準（平成十八年金融庁告示第十九号）(FSA capital adequacy notice, consolidated version updated 2026-08-24), 第五十六条第二項 (Article 56(2)) and 2 more
銀行法第十四条の二の規定に基づき、銀行がその保有する資産等に照らし自己資本の充実の状況が適当であるかどうかを判断するための基準（平成十八年金融庁告示第十九号）(FSA capital adequacy notice, consolidated version updated 2026-08-24), 第五十六条第二項 (Article 56(2))Primary source
“前項の規定にかかわらず、日本国政府及び日本銀行向けの円建てのエクスポージャーのうち円建てで調達されたもののリスク・ウェイトは、零パーセントとする。”
銀行法第十四条の二の規定に基づき、銀行がその経営の健全性を判断するための基準として定める流動性に係る健全性を判断するための基準（平成二十六年金融庁告示第六十号）(FSA LCR notice, consolidated version updated 2026-05-22), 第九条第一項第三号ロ (Article 9(1)(iii)(b)); 附則Primary source
“適用されるリスク・ウェイトが、零パーセントであること。”
平成二十六年金融庁告示第六十号 (FSA LCR notice), 附則 (application date)Primary source
“この告示は、平成二十七年三月三十一日から適用する。”
Tax-free interest on small public bond holdings (Tokubetsu-Maruyu)
Adds 0.7 points to the index
Under the Tokubetsu-Maruyu scheme, people with disabilities and certain other eligible persons receive JGB and local bond interest tax-free on up to 3.5 million yen of face value. Other interest is taxed at 20 percent plus surtaxes.
Why it counts: A dedicated tax exemption for public bonds, separate from the deposit allowance, tilts eligible savers toward government debt.
Legal basis 租税特別措置法（昭和三十二年法律第二十六号）(Act on Special Measures Concerning Taxation), 第四条第一項 (Article 4(1)) - 障害者等の少額公債の利子の非課税 and 1 more
租税特別措置法（昭和三十二年法律第二十六号）(Act on Special Measures Concerning Taxation), 第四条第一項 (Article 4(1)) - 障害者等の少額公債の利子の非課税Primary source
“国内に住所を有する個人で障害者等であるものが、金融商品取引業者又は金融機関で政令で定めるものの営業所又は事務所（以下この項において「販売機関の営業所等」という。）において、国債及び地方債で政令で定めるもの”
Ministry of Finance, Debt Management Report 2026, Fig. 1-27 JGB Interest Taxation System (for individuals)Primary source
“Interest, capital gains and profits from redemption on coupon-bearing bonds are subject to separate self-assessment taxation at a rate of 20% (15% income tax + 5% local tax)”
Fiscal Investment and Loan Program funded by FILP bonds
Adds 4.0 points to the index
The government lends to and invests in policy institutions through the Fiscal Investment and Loan Program, financed mainly by FILP bonds, a type of government bond. The FY2026 plan totals 19.0 trillion yen, up 6.8 trillion yen, to support the Japan-U.S. Strategic Investment Initiative, AI, semiconductors and other priority sectors.
Why it counts: The state allocates a large pool of credit to its own priorities at government borrowing cost, crowding out market lending and adding to government bond supply that captive buyers absorb.
Legal basis 特別会計に関する法律（平成十九年法律第二十三号）(Act on Special Accounts), 第六十二条第一項 (Article 62(1)) - FILP bonds and 1 more
特別会計に関する法律（平成十九年法律第二十三号）(Act on Special Accounts), 第六十二条第一項 (Article 62(1)) - FILP bondsPrimary source
“財政融資資金勘定において、財政融資資金の運用の財源に充てるために必要がある場合には、同勘定の負担において、公債を発行することができる。”
Ministry of Finance, Fiscal Investment and Loan Program (FILP) for FY2026Primary source
“An increase of 6.8 trillion yen from the previous year is to support the Japan-U.S. Strategic Investment Initiative,”
Enacted, not yet in force (2)
Crypto moved under the Financial Instruments and Exchange Act (insider trading, void unregistered sales)
Counts in the outlook only: adds 3.7 points once it applies
The amendment to the Financial Instruments and Exchange Act and Payment Services Act (Act No. 64 of 2026, passed 15 July 2026, promulgated 23 July 2026) moves crypto trading regulation from the Payment Services Act to the FIEA. Crypto dealing, offerings and lending become financial instruments business, insider-trading and market-abuse rules apply to crypto, dealers must not handle crypto that fails standards needed for the public interest and investor protection, and sales by unregistered operators of crypto that no registered dealer handles are void as a rule. The penalty for unregistered business rises to up to 10 years' imprisonment and/or a 10 million yen fine. It is not yet in force: the crypto provisions take effect on a date set by Cabinet Order within one year of promulgation (so by July 2027).
Why it counts: Making contracts with unregistered (mostly offshore) operators void and raising criminal penalties tightens the domestic-only channel for buying crypto. Listing standards limit which tokens residents can buy through licensed dealers.
Legal basis Act Partially Amending the Financial Instruments and Exchange Act and the Payment Services Act (Act No. 64 of 2026), Summary item 1-2 (FIEA art. 2(8)) and 4 more
Act Partially Amending the Financial Instruments and Exchange Act and the Payment Services Act (Act No. 64 of 2026), Summary item 1-2 (FIEA art. 2(8))Primary source
“暗号資産の売買、特定暗号資産の募集・売出し、暗号資産の借入れ等を業として行うことについて、金融商品取引業に含める。”
Act Partially Amending the Financial Instruments and Exchange Act and the Payment Services Act (Act No. 64 of 2026), Summary item 1-3 (insider trading, FIEA arts. 171-7 to 171-10)Primary source
“一定の暗号資産取引業を行う者による取扱いが行われている暗号資産の取引等に係るインサイダー取引規制の規定の整備を行う。”
Bill outline (法律案要綱), 1(3)(d) voidness of sales by unregistered operators (FIEA art. 171-15)Primary source
“金融商品取引業者による取扱いが行われていない暗号資産等の売付け等は、その売買契約等を原則として無効とすることとする。”
Bill outline (法律案要綱), Penalties for unregistered businessPrimary source
“十年以下の拘禁刑若しくは千万円以下の罰金に処し、又はこれを併科することとする。”
Bill outline (概要), 1. Review of crypto-asset regulationPrimary source
“暗号資産取引に係る規制を資金決済法から金商法に移管”
20% separate taxation limited to 'specified crypto assets' sold through registered dealers
Counts in the outlook only: adds 0.7 points once it applies
The FY2026 tax reform, enacted as Act No. 12 of 2026 (passed and promulgated on 31 March 2026), creates separate taxation at 20% (15% national income tax, 5% resident tax) for gains on 'specified crypto assets' (crypto whose name is entered in the FIEA dealer register) sold to or through a registered crypto-asset dealer, with a 3-year loss carry-forward against such gains. Dealers must report each customer's name, address, My Number and the crypto traded to the tax office by 31 January of the following year. It is not yet in force: the 20% rate applies to sales from 1 January of the year after the FIEA amendment (Act No. 64 of 2026, promulgated 23 July 2026) takes effect, on a date set by Cabinet Order within one year of promulgation, so 1 January 2027 or 1 January 2028; dealer reporting starts one year later. Crypto outside this scope stays under progressive comprehensive taxation, without the special deduction or the half-inclusion for assets held over five years, and its losses cannot be set against other income.
Why it counts: The lower rate applies only to tokens and trades inside the domestic registered-dealer channel, which reports every trade with the holder's My Number. Self-custodied, foreign-platform or unregistered tokens keep the high progressive rate under tighter rules, which steers savers into a fully reported domestic channel.
Legal basis FY2026 Tax Reform Outline (Reiwa 8), Part 1, 'Financial and securities taxation' (2)(1) and 4 more
FY2026 Tax Reform Outline (Reiwa 8), Part 1, 'Financial and securities taxation' (2)(1)Primary source
“他の所得と分離して 20％（所得税 15％、個人住民税５％）の税率により課税する。”
FY2026 Tax Reform Outline (Reiwa 8), Part 1 (2)(2) annual dealer reportPrimary source
“その取引があった日の翌年１月 31 日までに、税務署長に提出しなければならないこととする。”
FY2026 Tax Reform Outline (Reiwa 8), Part 1 (2)(6)(c) crypto outside the specified scopePrimary source
“他の総合課税の対象となる所得との損益通算を適用しないこととする。”
FY2026 Tax Reform Outline (Reiwa 8), Part 1 (2) Note 1 (start date)Primary source
“金融商品取引法の改正法の施行の日の属する年の翌年の１月１日（以下「適用開始日」という。）”
Special Taxation Measures Act art. 38-2 and 38-3 (as amended by Act No. 12 of 2026), MOF explanation, Chapter heading for art. 38-2Primary source
“特定暗号資産の譲渡による所得に係る申告分離課税制度等の創設”
Under discussion (1)
Bank of Japan CBDC: no issuance plan, holding limits and remuneration under study
Not counted in the index
In its October 2020 approach paper the Bank of Japan said it had no plan to issue a CBDC for now, and it has since moved from experiments to a pilot programme (since April 2023), with a progress report in June 2026 that says its design work does not fix the design for any actual rollout. The 2020 paper says any general-purpose CBDC would be indirect (distributed through banks and other intermediaries), and that limits on issuance and holdings and whether to pay interest need careful consideration.
Why it counts: A capped, possibly unremunerated digital yen distributed through banks would protect bank deposits (and so bank demand for JGBs) and would not offer a large-scale risk-free alternative to them.
Legal basis The Bank of Japan's Approach to Central Bank Digital Currency, Summary and 1 more
The Bank of Japan's Approach to Central Bank Digital Currency, SummaryPrimary source
“日本銀行では、現時点でCBDCを発行する計画はないが”
The Bank of Japan's Approach to Central Bank Digital Currency, 3(1) Relationship with price and financial stabilityPrimary source
“CBDCの機能要件や経済的な設計（発行額・保有額の制限や付利の有無等）については慎重な考慮が必要である”
Repealed (1)
Yield curve control and negative interest rate policy
Not counted in the index
On 19 March 2024 the Bank of Japan ended Quantitative and Qualitative Monetary Easing with Yield Curve Control and its negative interest rate policy, setting the overnight call rate at around 0 to 0.1 percent. It kept buying JGBs at about 6 trillion yen a month at first.
Why it counts: For years the framework pinned long-term JGB yields and short-term rates at or below zero, holding savers' returns below inflation; its legacy is the central bank's very large JGB stock.
Legal basis Bank of Japan, Changes in the Monetary Policy Framework (Monetary Policy Meeting decision), Item 1(1)-(2) and 2 more
Bank of Japan, Changes in the Monetary Policy Framework (Monetary Policy Meeting decision), Item 1(1)-(2)Primary source
“The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles.”
Bank of Japan, Changes in the Monetary Policy Framework, Item 1(1), footnote 2; footnote 3Primary source
“The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent.”
日本銀行法 (Bank of Japan Act, Act No. 89 of 1997), Article 33(1)(iii); Article 15(1)(iv)Primary source
“商業手形その他の手形（日本銀行の振出しに係るものを含む。）、国債その他の債券又は電子記録債権の売買”
Before today
8 examples from Japan in the toolkit, past and present, grouped by what the tool does. Each links to the instrument, its other examples and the cited law.
SteerSteer savings to the state
Captive demand
Forced placement of provident-fund and social-security reserves in government debtTrust Fund Bureau Fund Act (資金運用部資金法): mandatory full deposit of public pension reserves (and postal savings) with the Ministry of Finance Trust Fund Bureau, abolished by the fiscal 2001 FILP reform
2001HistoricalCaptive demand
Mandatory investment of postal and small-savings deposits in government securitiesTrust Fund Bureau Fund Act (資金運用部資金法): full mandatory deposit of postal savings with the Ministry of Finance Trust Fund Bureau
2001HistoricalDirected credit
Mandatory recycling of postal and regulated savingsFiscal Investment and Loan Program compulsory-deposit system; 1998 Fundamental Law on the Reform of Government Ministries and Agencies and subsequent FILP reform
2001Historical
HoldHold the price of money down
Central bank financing
Direct central-bank subscriptions to government securitiesBank of Japan direct underwriting arrangement for deficit-financing government bonds, launched 25 November 1932
1932 → 1936HistoricalRate caps
Usury laws and all-in credit-return limitsInterest Rate Restriction Act, Act No. 100 of 1954, article 3; Contributions Regulation Act
1954 → nowIn forceRate caps
Window guidance and supervisory pressure on bank pricing and lendingBank of Japan window-guidance administrative practice (madoguchi shido)
1991HistoricalRate caps
Deposit-rate ceilingsTemporary Interest Rate Adjustment Law; Bank of Japan Policy Board decision of 13-14 February 2003
2003 → 2005HistoricalCentral bank financing
Government bond yield pegs and yield curve controlBank of Japan Statement on Monetary Policy of 23 January 2024, paragraph 1(1)
2024Historical
Further reading
- What about Japan?
Chien, Cole, Lustig · Federal Reserve Bank of St. Louis, 2025
The March 2025 revision examines how Japan’s public sector finances longer-duration risky assets with cheap, largely floating-rate liabilities. Falling real rates expand fiscal room but can disadvantage younger and less financially sophisticated households whose portfolios lack comparable duration.
- Macroprudential tools, capital controls, and the trilemma: Insights from the Bretton Woods era
Monnet · CEPR, 2018
Shows that Bretton Woods capital controls often made domestic credit controls effective rather than simply sustaining international interest-rate gaps. This cautions against measuring repression or monetary autonomy solely from observed interest-rate differentials.
- The Liquidation of Government Debt
Reinhart, Sbrancia · IMF, 2015
Reconstructs government debt portfolios to measure the transfer from savers to governments when controlled interest rates combine with inflation. It finds substantial postwar debt liquidation and explains why high debt after the global financial crisis could revive these policies.
- Tracking Global Demand for Advanced Economy Sovereign Debt
Arslanalp, Tsuda · IMF, 2012
Builds comparable sovereign-debt holdings by investor group and introduces indicators of exposure to investor withdrawals. It documents increased bank exposure to home-country government debt after 2008, providing data for studying captive demand without assuming every domestic holding is coerced.
- Financial repression: Then and now
Reinhart, Kirkegaard · CEPR, 2012
Documents the post-2008 return of negative real rates and policies that encourage domestic institutions to absorb public debt. The authors interpret preferential regulatory treatment, pension restrictions and deposit-rate limits as possible modern forms of repression.