Should You Buy Individual Government Bonds? Calculating the Interest on a 10 Million Yen Investment at a 2.24% Interest Rate
“What do you think about individual government bonds?”
I received this question from a follower.
Recently, the interest rates on individual government bonds have been rising.
Influencers and YouTubers have also started saying, “Government bonds are good.”
I think many people are wondering whether they should buy them.
But do you know how much you would actually receive each year if you bought them?
Even if you look at the interest rate percentage, it’s hard to get a clear picture of the actual amount you’ll receive, right?
When deciding whether to buy individual government bonds, what’s important is…
not how good the interest rate is, but whether it helps you achieve what you want to accomplish.
In this article, I’ll explain how individual government bonds work and whether you should buy them♡
How individual government bonds work… When you lend money to the government, the principal is returned at maturity
First, let’s look at how individual government bonds work.
Government bonds are the country’s debt.
The government issues them by saying, “Please lend us money,” and we buy them.
In other words, we are the lenders, and the government is the borrower.
While they are borrowing the money, the government pays us interest.
If you hold them until maturity, the government guarantees the principal.
For example, if you buy 10 million yen worth of 5-year government bonds, you will get 10 million yen back after 5 years.
Moreover, you can buy individual government bonds starting from 10,000 yen.
Think of it like a fixed-term deposit guaranteed by the government.
The mechanism itself is very simple, so you don’t need to overthink it.
However, there is a non-zero possibility that the principal could be lost if the government were to go bankrupt.
In that case, the government would decide how much of the principal would be returned.
It’s a rare occurrence, but you should understand the mechanism properly.
Is a 5-year fixed 2.24% high? The interest received on 10 million yen is about 178,500 yen per year
Individual government bonds offered in September 2026 have a 5-year fixed rate of 2.24% per year.
Even at major banks, ordinary savings accounts are only about 0.2%.
It was around 0.05% until a little while ago, so it looks very high, right?
As interest rates in Japan have risen, both savings and government bond rates have gone up together.
2.24% is the annual interest rate.
However, interest is subject to a tax of about 20%.
In other words, you only keep about 80% of the interest.
If you buy 10 million yen with a 5-year fixed rate, the amount you can receive annually after taxes is about 178,500 yen.
For 1 million yen, it’s about 17,800 yen per year.
It is certainly better than leaving it in a time deposit or a regular savings account.
When you hear that interest rates have gone up, it sounds like a lot, but in reality, this is about what it amounts to.
Whether you feel this is a lot or a little is up to each individual.
Many people also consider government bonds as a place to park education funds or a portion of their retirement money.
By the way, 10-year government bonds for individuals have a variable interest rate, so the rate is lower than the 5-year fixed rate.
If you are thinking in terms of interest rates rising from here on out, one could argue that the variable rate is better.
Is Japan full of debt and headed for bankruptcy? Beware of sales pitches for foreign currency-denominated insurance
When people hear that the government has issued a lot of bonds, some worry, “Isn’t Japan full of debt and going to go bankrupt?”
But I am not worried at all.
In fact, I believe Japan’s financial condition is sound.
Greece, which fell into crisis in the past, had borrowed money from overseas.
However, Japan is borrowing money from within Japan.
To put it simply, it’s like a husband borrowing money from his wife.
In that case, you don’t really need to worry that much, right?
Therefore, I think it is almost unthinkable that Japan will go bankrupt in the next few decades.
There are influencers who say “Japan is in trouble,” but I wish they knew a little more about Japan.
Despite that, people are sometimes advised, “Japan is dangerous, so let’s prepare with foreign bonds or foreign currency-denominated insurance.”
The ones making the recommendations are insurance agents who sell foreign currency-denominated insurance and foreign bonds.
They talk about “Japan being dangerous” because they have products they want to sell.
There is almost no risk of Japan going bankrupt, so there is no need to buy products just because an insurance agent tells you to.
In fact, the possibility that your assets will stop growing due to fees being deducted is much higher.
For most people, government bonds for individuals won’t help them achieve their goals
Government bonds for individuals are like time deposits where the government guarantees the principal if you hold them until maturity.
Since they are slightly more profitable than savings accounts, I think many people think, “I’ll just go with government bonds for now.”
But you know,
even if you deposit 10 million yen, you only receive about 178,500 yen per year after taxes.
For 1 million yen, it’s about 17,800 yen per year.
If you ask whether that will change your life, it won’t, right?
If you have a plan that ensures you have enough money until you are 100 and allows you to achieve everything you want to achieve, then I think it’s fine to choose government bonds.
However, having looked at the household finances of many students so far, most people would run out of money before they reach 100.
That is why most people are not in a position to just relax with government bonds.
The most important thing is not the high interest rate, but whether you can reach the goals you want to achieve.
First, try writing down what you want to achieve and the money you need for it. That is the quickest way to decide whether or not to buy government bonds♡