Business | Jul 04

BOJ owns half of JGB market after huge buying to defend yield cap

The Bank of Japan (BOJ) now owns half of outstanding Japanese government bonds (JGB) issued in the market, data showed on Monday (Jul 4), a sign the bank’s aggressive buying to defend its 0.25 per cent yield cap is bloating an already huge balance sheet.

The data underscores the cost the central bank is paying to keep global upward pressure on yields from pushing up Japan’s borrowing costs.

The balance of JGBs held by the BOJ stood at 517.24 trillion yen as of end-June, up by 4.19 trillion yen from a month ago, central bank data showed.

As a result, the BOJ owned a record 50.4 per cent of outstanding JGBs issued in the market, up from 49.7 per cent in May, according to estimates by Mitsubishi UFG Morgan Stanley Securities.

Under its yield curve control policy, the BOJ sets an implicit 0.25 per cent cap around its 0 per cent target for the 10-year JGB yield.

The BOJ ramped up bond buying last month as the yield cap came under renewed pressure from rising global interest rates, highlighting the difficulty in remaining a dovish outlier in a global wave of monetary tightening.

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