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TOKYO, June 29 (Reuters) – The Bank of Japan (BOJ) on Tuesday trimmed the amount of Japanese government bonds it will purchase in the coming quarter and also shifted its announcement to a quarterly schedule.
The BOJ unveiled what it would buy for the July-September quarter, instead of for the following month as it has done in the past, fixing its bond buying amount for a longer period, rather than fine-tuning its operations to control bond yields.
The move likely reflects the central bank’s desire to make the Japanese bond market more active after its own policy to target the 10-year benchmark government bond yield around zero percent led to stagnant trading, analysts said.
In the past, the BOJ has actively changed the size and frequency of its bond purchases to warn against the 10-year JGB yield moving away from its zero percent target.
“The BOJ is trying to raise the predictability of its operations. It seems to think it would be desirable for the market to move on other factors than its operations,” said Katsutoshi Inadome, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
Still, many analysts are sceptical if the latest tweak is enough to provide strong trading incentives, given the dominance of the central bank.
It is holding almost half of all government bonds and remains by far the biggest buyer of JGBs even after it reduces the size of its buying in three maturity zones: one to three, five to 10 and 10 to 25 year bonds from July.
In total, its monthly purchase of conventional JGBs will be cut by 250 billion yen to 5.65 trillion yen ($51.1 billion) from June.
In an apparent attempt to foster larger market moves, BOJ Governor Haruhiko Kuroda clarified in March that its policy target of “around zero percent” means 25 basis points above or below zero percent.
But that failed to stimulate the moribund market, with the 10-year JGB yield moving in a tight, two-basis point (0.02% point) range for the whole of May, matching the narrowest record marked in June 2018.
In its latest statements, the BOJ also said that it may change the frequency and size of its purchases when the 10-year yield threatens to move out of its target.
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