Japan to avoid JGB auctions on BOJ policy days

TOKYO, March 27 (Reuters) - Japan's Ministry of Finance has begun scheduling Japanese government bond auctions so that they do not coincide with Bank of Japan policy announcements, in line with requests from investors, the ministry said on Tuesday.

To avoid market volatility, offers for JGBs with coupons, financing bills, treasury bills and special debt will not be held on days that the BOJ is slated to announce policy decisions, starting with the June line-up of auctions released on Tuesday.

"Markets can become volatile when the BOJ makes policy announcements due to a wide range of news and information that comes out," Naoyuki Yoshino, head of the MOF's regular forum with JGB investors, told reporters following a meeting on Tuesday.

"It would be best to avoid holding auctions at such times."

The MOF's last 30-year JGB auction was held on the final day of the BOJ's two-day policy meeting in January, when the central bank surprised many in the market by keeping rates steady at 0.25 percent.

The ministry held an auction of three-month financing bills (FBs) on Feb. 21, the day the central bank announced a 25-basis-point rate rise to 0.5 percent, and an offer of two-month FBs is scheduled on the last day of a two-day meeting next month.

The BOJ holds one- or two-day policy meetings each month. The MOF said it would continue to hold auctions on the first day of two-day meetings.

The MOF customarily does not hold auctions on Mondays and Fridays but said it would do so from June if necessary.

Yoshino also reiterated that the MOF was continuing to look into offering its first-ever 40-year JGBs as early as November.

A MOF official had said at a JGB roadshow in London earlier in the month that Japan was likely to make its first issuance of 40-year government bonds in November.

Investors including Japanese life insurers and European parties have expressed interest in such a maturity, Yoshino said.

The MOF has said any issuance of 40-year JGBs would be on an ad hoc basis and it would reopen the initial issue until liquidity grows. The ministry has also said an initial issue amount could be much less than 100 billion yen ($850 million).

The panel reiterated that it will keep reopening scarce 20-year JGBs, offering 100 billion yen each month for the first six months of the 2007/08 financial year that begins next month.

The special auctions are aimed at relieving a supply crunch in the secondary market. The MOF said it plans to reopen 20-year bonds that have about 11 to 15 years to maturity, and it will target the Nos. 38-60 issues. ($1=118.24 Yen)