On the 27th, the Bank of Japan announced its plans to purchase long-term government bonds from January to March 2024.announcementdid. Starting in December, the lower limit of the range of planned purchases per transaction in the medium- to long-term zone was lowered, reducing the number of purchases of super-long-term bonds. Increased flexibility in future monetary operations.
The lower limit of the range for purchases with remaining maturity of more than 1 year and less than 3 years, more than 3 years and less than 5 years, and more than 5 years and less than 10 years.Conventional50 billion yen each. The number of monthly purchases for those over 10 years but under 25 years and over 25 years has been reduced by one to three times a month and two times a month, respectively.
Yields on a wide range of maturities have fallen in the government bond market, and the Bank of Japan has so far reduced purchases within a range. Purchase amounts in major zones are approaching the lower end of the range, and the lower end will be expanded to provide room for further reductions.
The Ministry of Finance’s government bond issuance plan for next year announced on the 22nd indicates a policy to significantly reduce issuance, mainly short- and medium-term bonds. As a result, there is a growing possibility that supply and demand will become tight in the government bond market, and operations were expected to be lowered across a wide range of maturities.
Changes in the amount of government bonds purchased by the Bank of Japan
Source: Bank of Japan, Bloomberg
Next fiscal year, government bonds will be issued at 171 trillion yen, mainly short- and medium-term bonds and 20-year bonds, down 10% from FY23.
In order to maintain yield curve control (long-term and short-term interest rate control, YCC), the Bank of Japan has been purchasing most of the issued amount through operations, but the YCC was effectively abolished at the monetary policy meeting in October. This range adjustment could cause domestic interest rates to rise, which could encourage domestic institutional investors who had been investing in foreign bonds, such as those from the United States and Europe, to return to yen bonds due to investment difficulties caused by ultra-low interest rate policies.
Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, said that the lower limit of the range in the medium- to long-term zone has been reduced, giving the impression that the current situation has been confirmed. It’s a selling point,” he said.
Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, said the reduction in the number of purchases of super-long-term bonds was a surprise. He said that he had expected a certain amount of reduction in the issuance amount of 20-year bonds with a remaining term of 10 to 25 years, but that he had not anticipated that the number of bonds would be reduced.
Following the announcement of the purchase plan, selling briefly became dominant in the bond market. Long-term government bond futures for March were temporarily priced at 146.61 yen in overnight trading, down 22 sen from the daytime closing price on the 27th (146.83 yen).
Purchase amount per purchase
The month-to-month ratio between January and December is less than 1 year
150 billion yen
(1 time per month)
150 billion yen
(1 time per month)
No change for 1-3 years
300 billion to 650 billion yen
(4 times a month)
350 billion to 650 billion yen
(4 times a month)
lower range lower limit 3-5 years
350 billion to 750 billion yen
(4 times a month)
400 billion to 750 billion yen
(4 times a month)
Lower range lower limit 5-10 years
400 billion to 900 billion yen
(4 times a month)
450 billion to 900 billion yen
(4 times a month)
Lower range lower limit 10-25 years
100 billion to 500 billion yen
(3 times a month)
100 billion to 500 billion yen
(4 times a month)
Decrease in frequency over 25 years
50 billion to 350 billion yen
(2 times a month)
50 billion to 350 billion yen
(3 times a month)
decrease in number of times
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(Article updated with 7th paragraph added)
2023-12-27 08:08:02
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