BOJ holds more than 100% of newly issued 10-year JGBs: report

THE Bank of Japan’s (BOJ) ownership of newly issued 10-year Japanese government bonds (JGBs) exceeds the amount sold at auction, Mitsubishi UFJ Morgan Stanley Securities said in a report on Wednesday (Nov 2), a sign of its strong commitment to defend its low interest rate policy.

The central bank owned 3.1 trillion yen (S$28.8 billion) worth of the 368th issuance of 10-year government bonds as of Oct 31, according to Keisuke Tsuruta, a bond strategist at Mitsubishi UFJ Morgan Stanley Securities. The amount of No 368 JGBs sold in the market was 2.8 trillion yen by that date.

The 368th issuance of bonds were sold via two separate auctions by the Ministry of Finance in October and this month.

The holdings underscore the Japanese central bank’s relentless defence of its 10-year yield cap, which has caused distortions in the shape of the yield curve.

“This shows how the Bank of Japan’s holdings of JGBs are increasing amid strong upward pressure on interest rates,” said Takayuki Miyajima, senior economist at Sony Financial Group.

The BOJ remains an outlier among a global wave of central banks tightening monetary policy to combat soaring inflation, as it focuses on supporting a fragile economy.

Under so called the yield curve control, the BOJ guides short-term interest rates at -0.1 per cent and the 10-year bond yield around zero as part of efforts to sustainably prop up inflation to its 2 per cent target.

An official of the Bank of Japan declined to comment. REUTERS