BoJ Holdings of JGB’s Exceed $1.2 Trillion

The Bank of Japan (8301)’s holdings of the government’s bonds exceeded 100 trillion yen ($1.2 trillion) for the first time, raising the risk that yields will jump on perceptions that it is financing public spending.

The central bank held 104.9 trillion yen of the debt at the end of September, 11.1 percent of all government bonds, a quarterly central bank report showed today in Tokyo. The BOJ said it was the highest on record. Bond holdings by foreign investors rose to a record 9.1 percent.

The BOJ yesterday expanded its asset purchase program for the fifth time this year, with half of the 10 trillion-yen increase to be spent on JGBs. Incoming Prime Minister Shinzo Abe wants more central-bank action to defeat deflation and has pledged fiscal stimulus to stoke growth, even as he’s constrained by the world’s largest public debt.

“Doubt will increase about whether the BOJ is financing government debt given the prospects for more monetary stimulus,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute in Tokyo. “Once investors start to price this in, yields will go up and Japan’s finances will be unmanageable.”

The central bank said it will buy 44 trillion yen of bonds by the end of next year through the asset-purchase fund, equal to the amount of new government bonds issued this fiscal year.

BOJ Governor Masaaki Shirakawa said yesterday that the bank will not directly finance government debt, which rose to 948 trillion yen at the end of last quarter, according to today’s report.

The BOJ has a self-imposed rule of keeping the value of its bond holdings below the amount of cash in circulation. Excluding the asset-purchase program, which the BOJ counts separately from other bond holdings, the central bank holds 67.4 trillion yen in bonds, compared with 82.5 billion yen in cash circulating.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell