TOKYO May 9 The Bank of Japan will set aside
four times the amount of money it normally would as reserves to
offset the risk posed by the assets it is rapidly adding to its
balance sheet with its quantitative easing.
The BOJ said on Friday that it has requested permission from
the finance ministry to set aside 20 percent of the funds left
over after the central bank closes its books for fiscal 2013,
which ended in March. The finance ministry is likely to approve.
Currently, the BOJ is required to set aside only 5 percent
of excess funds. The BOJ will announce its results for fiscal
2015 sometime in late May.
Since April last year, the BOJ has rapidly increased its
purchases of government debt and riskier assets, such as real
estate investment trusts and exchange-traded funds, as part of
quantitative easing aimed at ending 15 years of deflation.
As a result, the BOJ's balance sheet has expanded to 246
trillion yen ($2.42 trillion) at the end of April from 164
trillion yen at the end of March last year.
This has pushed the central bank's capital adequacy ratio
below its desired level of 8 percent, so the central bank judged
that it was necessary to increase the reserves it would set
aside, according to an official from the monetary policy board's
The BOJ has kept monetary policy steady since expanding
quantitative easing in April last year, when it pledged to
double base money via aggressive asset purchases to accelerate
consumer inflation to 2 percent in two years.
($1 = 101.6 yen)
(Reporting by Sumio Ito; Writing by Stanley White)