BOJ to reduce bond-buying amounts in Jan-March quarter
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By Junko Fujita
TOKYO, Dec 27 (Reuters) -The Bank of Japan on Wednesday said it would reduce the amount of bonds it buys in its regular operations in the January-March quarter, as the central bank tries to give more liquidity to the market.
The BOJ cut the minimum amounts it would buy of bonds with maturities of between one and 10 years and cut the frequency of purchases for longer-dated notes.
The BOJ has conducted aggressive bond buying operations to defend its ultra-low rate policy which has squeezed liquidity in the Japanese government bond (JGB) and distorted the yield curve.
The curve has corrected as the BOJ has been loosening its grip on a cap on the benchmark 10-year JGB yield JP10YTN=JBTC, but the bank remains a dominant owner of JGBs.
The market had expected the reduction as the BOJ has been gradually cutting the amount it buys in recent operations as yields fell to multi-month lows to mirror declines in U.S. Treasury yields.
However, the reduction in the frequency of offers of super long-dated bonds was a surprise, strategists said.
"Yields on the super long-dated bonds have fallen enough so the BOJ can cut the offer without hurting the market," said Keisuke Tsuruta, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
"The move is also in line with the Ministry of Finance's plan to reduce issuance of 20-year bonds."
The MOF said last week it would bring forward a planned 200 billion yen ($1.40 billion) cut in 20-year bond issuance to January from April as rising interest rates hurt appetite for long-dated bonds.
The central bank also cut the minimum amounts on offer for bonds with shorter maturities after offers in its latest operations came close to the bottom end of the current range.
Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, said the reduction in offers could contradict current monetary policy, under which the BOJ pledges to expand the monetary base to achieve a 2% inflation target.
($1 = 142.4900 yen)
($1 = 142.5700 yen)
Reporting by Junko Fujita
Editing by David Goodman and Sharon Singleton
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