Source: Zhitong Finance
According to an analysis of Bank of Japan data, the Bank of Japan's net purchases in the first quarter fell to negative 2.79 trillion yen (17.9 billion US dollars) as redemptions expanded.
Investors in Japanese government bonds have tasted the Bank of Japan's quantitative austerity. According to an analysis of Bank of Japan data, the Bank of Japan's net purchases in the first quarter fell to negative 2.79 trillion yen (17.9 billion US dollars) as redemptions expanded.
Although the Bank of Japan's bond holdings usually decline in March, this is the first time since 2008 that it has declined throughout the first quarter.
The market is likely to keep a close eye on these purchases as traders analyze the central bank's brief monetary policy statement on Friday. The Bank of Japan said it would buy bonds in accordance with the decision made at the March meeting. At that time, the Bank of Japan decided to stay away from extremely low interest rates.
Takeshi Minami, chief economist at the Norinchukin Research Institute, said, “The Bank of Japan is unlikely to maintain its bond holdings, but given rising inflation, it is just waiting for the right time to start reducing the size of purchases,” Minami said that overall quantitative austerity could begin as early as July-September.
Bank of Japan's holdings declined quarterly for the first time since 2008
The monetary authority said that bond purchases will be roughly in line with the previous monthly level of around 6 trillion yen. The yen fell to a 34-year low against the US dollar as the Bank of Japan's decision maintained a huge interest rate gap between Japan and other major economies.
The yield on Japan's benchmark 10-year treasury bond climbed as much as 4 basis points to 0.93%, the highest level since November last year.
Bank of Japan Governor Kazuo Watada has stated many times that the Bank of Japan will eventually reduce bond purchases at some point in the future, but the exact timing is uncertain. As of the end of last year, the central bank held 54% of outstanding government bonds.
Analysts Stephen Chiu and Chunyu Zhu said in a report on Friday that “the Bank of Japan may reduce bond purchases under the circumstances of 'secret drawdown'.”