By SHINYA TOKUSHIMA/ Staff Writer
September 20, 2022 at 18:57 JST
The Bank of Japan building in Tokyo’s Chuo Ward (Hiroyuki Yamamoto)
The central bank owns nearly half of all government-issued bonds, newly released data shows.
That is largely thanks to the bulk-buying spree it began in an attempt to push down interest rates and curb inflation.
The Bank of Japan owned a record 49.6 percent of government-issued bonds, excluding treasury discount bills, at the end of June, according to flow of funds statistics it released on Sept. 20.
At the end of March, the BOJ owned 48.2 percent of government-issued bonds.
The government’s outstanding bond balance reached 1.06 quadrillion yen ($7.43 trillion) as of the end of June, of which the BOJ owned a record 528 trillion yen, according to the central bank.
The BOJ has been purchasing government bonds because of interest rate hikes in the United States and Europe.
After Russia invaded Ukraine in February, central banks in foreign countries including the United States shifted their policies to raise interest rates, a move aimed at fighting inflation.
Speculation then spread among investors that this would encourage the BOJ to review its monetary easing policies. That caused a selloff of Japanese government bonds and a spike in interest rates, and the prices of Japanese government bonds fell.
Then the BOJ, which aims to maintain a long-term interest rate lower than around 0.25 percent, began rapidly buying up fixed-rate bonds to bolster the Japanese economy.
The BOJ bought around 16 trillion yen in long-term government bonds in June. It has never bought that much in bonds in the span of a single month before.
At the end of 2012, before current BOJ Governor Haruhiko Kuroda began the central bank’s monetary easing program, the bank only owned around 11 percent of Japanese government bonds.
But that figure rose sharply over the past decade.
Its decision to buy up so many government bonds has long been controversial.
Critics argue that the central bank is effectively monetizing debt by supporting the government's fund procurement.
Some market participants have even expressed concern that the current situation could weaken the functions of the market or impair the BOJ’s finances.
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