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TOKYO, Dec 1 (Reuters) - Japan’s Ministry of Finance does not plan for the time being to absorb the extra 2 trillion yen ($24 billion) pumped into the money supply as a result of its yen-selling intervention in September, a senior ministry official said on Wednesday.
Tokyo stepped into the currency market on Sept. 15 for the first time in more than six years to stem a rise in the yen seen as a threat to Japan’s economic recovery. [ID:nTOE68T08I]
By law, the government does not have the right to print cash and has to fund its intervention by issuing financing bills (FBs). It sets the intervention amount and the Bank of Japan, which has the right to print cash, acts as its agent and temporarily underwrites the bills.
The BOJ then sells yen, but the Ministry of Finance must eventually pay back the BOJ by selling the same amount of FBs in the money market.
This time, the ministry issued three-month FBs to the BOJ to fund the intervention and redeemed them in November, but has made use of surplus money in national coffers to avoid issuing FBs in the money market for the redemption.
It plans to continue the measure for the time being in order not to impact markets, the official said. (Reporting by Sumio Ito; Editing by Michael Watson)
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