3 Minutes to Read (Adds detail, background) Reuters, TOKYO, June 29 – The Bank of Japan (BOJ) reduced the amount of Japanese government bonds it will buy in the coming quarter on Tuesday and announced its decision on a quarterly basis. The BOJ announced its bond purchases for the July-September quarter, rather than the following month, as it had previously done, committing to a longer period of bond purchases rather than fine-tuning its operations to control bond yields. Analysts believe the move underscores the central bank’s intention to increase activity in the Japanese bond market after its own policy of targeting the 10-year benchmark government bond yield around zero percent resulted in stagnant trading. The BOJ has altered the size and frequency of its asset purchases in the past to warn against the 10-year JGB yield deviating from its zero percent objective. “The BOJ is attempting to make its activities more predictable. It appears to believe that the market should move based on factors other than its own operations “senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, Katsutoshi Inadome. Given the central bank’s dominance, many analysts are sceptical that the current change will be adequate to offer robust trading incentives. Even after reducing the scale of its buying in three maturity zones: one to three, five to ten, and ten to 25 year bonds from July, it still holds about half of all government bonds and remains by far the largest buyer of JGBs. From June, it would reduce its monthly purchase of conventional JGBs by 250 billion yen to 5.65 trillion yen ($51.1 billion). BOJ Governor Haruhiko Kuroda explained in March that the BOJ’s policy aim of “around zero percent” means 25 basis points above or below zero percent. This appears to be an attempt to encourage greater market swings. However, this failed to energise the dormant market, with the 10-year JGB yield moving in a tight two-basis-point (0.02%) band for the whole month of May, matching the smallest range seen since June 2018. The BOJ also stated that if the 10-year yield threatens to move out of its target range, it may adjust the frequency and magnitude of its purchases. 1 dollar = 110.59 yen Hideyuki Sano and Tomo Uetake contributed reporting, and Jacqueline Wong edited the piece. Continue reading