Bank of Japan’s government bond holdings decline in the first quarter, perhaps a prelude to quantitative tightening – Bloomberg

Investors in Japanese government bonds may already be feeling the effects of quantitative tightening by the Bank of Japan.

According to Bank of Japan data, the Bank of Japan’s net purchases of government bonds in the January-March period decreased to -2.79 trillion yen due to an increase in redemption amounts. It is common for holdings to decline at the end of a period, but this is the first time since 2008 that they have declined for the entire quarter.

In a statement released after the gold policy meeting on the 26th, the Bank of Japan said it would continue the policy of purchasing government bonds decided in March. The Bank of Japan’s decision will maintain a wide gap between Japan’s interest rates and other major countries’ interest rates, and the yen has hit a 34-year low against the dollar.

Takeshi Minami, a senior researcher at the Norinchukin Research Institute, said that the Bank of Japan is probably “looking at the timing to reduce its purchases.”With inflation remaining high, it is unlikely that the balance will be maintained forever, and the Bank of Japan will not be able to maintain its balance indefinitely, so it could be as early as 7-7. He says it would not be surprising if quantitative tightening begins around September.

Governor Kazuo Ueda has said the Bank of Japan will reduce its purchases of government bonds at some point in the future. The Bank of Japan held 54% of outstanding government bonds as of the end of last year.

“The Bank of Japan may reduce its bond purchases behind the scenes through a method known as ‘stealth tapering,'” Bloomberg Intelligence analysts Stephen Chiu and Zhang Chun-yu wrote in a note. Indicated.

The yield on 10-year government bonds rose 4 basis points to 0.93%, the highest level since November last year.