BOJ's government debt holdings hit record in fourth quarter

FILE PHOTO: A man walks past the Bank of Japan building in Tokyo, Japan January 15, 2018. REUTERS/Kim Kyung-Hoon

TOKYO (Reuters) - The Bank of Japan’s holdings of government debt rose to a record in October-December under its quantitative easing program, underlining concerns about the sustainability of monetary policy.

The BOJ held a record 449 trillion yen ($4.24 trillion) in government debt at the end of December, up 6.8 percent from the same period a year earlier, central bank data showed on Monday.

The central bank held 41.1 percent of all government debt at the end of December, also the highest on record. Insurance companies and pensions were the second-largest holders, accounting for 21.6 percent of all bonds outstanding.

Overseas investors’ holdings of Japanese government debt rose to 122 trillion yen at the end of December, the highest amount on record.

The BOJ has slowed the pace of government debt purchases since it switched its policy benchmark in September 2016 to targeting interest rates from the size of the monetary base.

However, the overall size of the BOJ’s government debt holdings have continued to set record highs, which could fuel concerns that quantitative easing will damage liquidity in the bond market.

Central bank data showed that assets held by Japanese households rose 3.9 percent in the fourth quarter from a year earlier to a record 1,880 trillion yen due to gains in stocks and investment trusts.

($1 = 105.8200 yen)

Writing by Stanley White; Reporting by Sumio Ito; Editing by Sam Holmes