The Great JGB Split: Why Global Funds Are Selling and Iyogin Is Buying for the First Time in a Decade

The BOJ is tightening both rates and its balance sheet simultaneously. At its June 15–16 meeting, the central bank is expected to raise the policy rate from 0.75% to 1% and also discuss accelerating the reduction in its JGB purchases to ¥400 billion per quarter starting in July 2026 . With the BOJ—the market’s single largest buyer—reducing its footprint, private investors must absorb more supply. Some officials have also signaled the possibility of a further rate hike later in 2026 . That creates a “higher-for-longer” anxiety that punishes long-duration bonds.

The carry trade is unwinding. The narrowing spread between U.S. and Japanese bond yields reduces the incentive for global investors to hold JGBs as a relative-value play against U.S. Treasuries . With Japanese rates rising and the U.S. rate cycle looking more stable, the trade that attracted foreign capital into JGBs is losing its edge.

Why Iyogin Holdings is buying for the first time in a decade

While global managers are reducing risk, Iyogin Holdings—the regional bank with the best recent bond-trading record in Japan—has started buying super-long JGBs for the first time since 2016 . The move is small, tactical, and far from a bullish call, but it signals something important about how domestic institutions view the rate cycle.

CEO Kenji Miyoshi is penciling in a terminal BOJ policy rate near 1.5% by the end of 2027 . At current yields—the 30-year JGB was yielding 3.44% in May—that leaves a positive carry once the hiking cycle peaks. His rationale is not that rates will stop rising soon, but that the long end already prices in a realistic terminal rate. Senior executive Naoaki Fujita has stressed that the bank is not fully re-engaging with duration risk and is avoiding 10-year bonds, which it believes could still see yields rise further .

The bank’s portfolio tells the same story: currently less than 10% of its ¥1.8 trillion ($12 billion) portfolio is allocated to JGBs, though Miyoshi has said that could rise to 50% if yields become more appealing . After a decade of saying there was “no way to invest” in JGBs, the bank is testing the water with small, opportunistic purchases of long-dated bonds .

What the split reveals about normalization uncertainty

The sell-off and the buy-side are two sides of the same coin—deep disagreement about where Japan's rate cycle ends and how much risk the bond market can tolerate. Foreign frustration stems from the fact that core inflation is running at 2.8% and Q1 GDP was resilient, yet the BOJ has moved only in tiny increments from near zero . Investors who expected a faster normalization have been caught offside by the long-end yield spike.

The market is broadly pricing a path to a terminal rate near 1.5%, but there is wide disagreement about whether the BOJ can sustain that trajectory given Japan's massive public debt and political pressure from Prime Minister Takaichi's fiscal spending plans . Global managers are reducing convexity risk at the long end. Domestic banks with deposit funding and no foreign-exchange hedging needs are cautiously stepping in at yields they haven't seen in a generation. Neither camp is making a confident directional bet.