Japan's inflation-linked bonds, which the Ministry of Finance calls inflation-indexed JGBs, have a 10-year term and are linked to the nationwide consumer price index (all items, less fresh food). The face value multiplied by the indexation coefficient (the ratio of the index to its value at issue) is called the inflation-adjusted principal amount, and interest and redemption amounts are based on it. Issues from fiscal 2013 onward are redeemed at face value even if the indexation coefficient at maturity is below 1, but interest has no floor.
Consider a hypothetical example with a face value of 10 billion yen and a coupon rate of 0.1% a year. An indexation coefficient of 1.02 on a payment date gives an inflation-adjusted principal of 10.2 billion yen and interest of 5.1 million yen for half a year. With an indexation coefficient of 0.97, the inflation-adjusted principal is 9.7 billion yen and the interest falls to 4.85 million yen.