* To make ESM bonds key investment ranking with major euro
* Japan considers buying first ESM issuance Tuesday -MOF
* Stability in Europe helps stabilise yen, currencies -Aso
* Aso's remarks prompt a jump in euro/yen
By Tetsushi Kajimoto
TOKYO, Jan 8 Finance Minister Taro Aso said on
Tuesday that Japan will purchase bonds issued by the euro zone's
permanent bailout fund to help foster financial stability in
Aso, speaking to reporters after a cabinet meeting, said the
European Stability Mechanism (ESM) plans to issue securities
later on Tuesday for the first time since it was launched last
"Stability in Europe's financial situation helps stabilise
currencies including the yen," Aso said.
"From this standpoint and based on Europe's further efforts
on financial stability, Japan will purchase a portion of ESM
bonds continuously by utilising foreign reserves."
Aso's remarks prompted a jump in the euro to an intraday
high of 115.25 yen from around 114.60 yen, though
some market players said it was unclear whether Japan's plans to
buy ESM bonds would have any direct impact on the yen.
A finance ministry official said the ESM will issue
three-month bills totalling 2 billion euro ($2.6 billion) later
on Tuesday and that Japan will decide whether to buy some of the
first debt issue with euro from its foreign reserves after
examining the issuance terms.
Japan will tap euro liquidity in the country's foreign
reserves for ESM bond purchases, meaning that it won't change
the currency makeup of its $1.27 trillion reserves -- the
world's second largest after China's -- most of which is
believed to be in dollars.
Japanese authorities do not give breakdowns of its foreign
Japan has so far bought about 7 billion euros worth of bonds
issued by the euro zone's temporary rescue fund, roughly 6.7
percent of rescue bonds on issue as at the end of last year.
Japan has been considering buying bonds to be issued by the
ESM, which replaces the temporary European Financial Stability
Facility (EFSF), to help resolve Europe's debt crisis and
improve Japan's management of foreign reserves.
The ESM bonds will rank equally with other euro zone
securities held by Japan.
The ESM is designed to lend to distressed euro zone
sovereigns in return for strict fiscal and structural reforms
that aim to put over-indebted economies back on track.