BOJ official: mulling increasing frequency of JGB purchases

TOKYO Wed Apr 17, 2013 6:47am EDT

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The logo of the Tokyo Stock Exchange is seen as cherry blossoms in full bloom in Tokyo April 11, 2012.

Credit: Reuters/Toru Hanai

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TOKYO (Reuters) - A senior Bank of Japan official said on Wednesday the central bank will consider increasing the frequency of its long-term government debt purchases in response to bond dealers' concerns about distorting markets.

The shift in strategy came after many bond dealers asked the BOJ at a meeting on Wednesday to buy smaller amounts of debt in more frequent market operations as financial institutions try to adapt to the central bank's new monetary policy framework.

A big increase in the number of monthly market operations will be difficult, the BOJ official said, because there is a limited window when the BOJ can buy bonds. Still, even a slight increase may help ease recent volatility in long-term yields.

"It will not be easy, but because so many people had the opinion that we should increase the frequency, we want to consider how to do so," the official said.

The official spoke to reporters after the BOJ met with bond dealers.

The BOJ stunned investors earlier this month by overhauling its monetary policy and agreeing to double the amount of government debt it holds to lower long-term yields and end 15 years of deflation.

Under its new policy, the BOJ buys around 1 trillion yen of debt 5 to 6 times a month, a size that even the BOJ official admitted is rare for a single order.

Despite the BOJ's intention to lower the yield curve, yields have been rising since the BOJ's announcement due to worries the central bank's purchases are too large and will crowd out other institutional investors.

(Reporting by Stanley White; Editing by Sanjeev Miglani)

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