Japan’s BoJ trims purchase of govt bonds

TOKYO: Speculation the Bank of Japan (BoJ) may wind back its monetary stimulus this year gripped markets yesterday after the central bank trimmed the amount of its purchases of Japanese government bonds.

Traders appeared to latch on to the BoJ announcement that it will buy less of the long-dated bonds, sending the dollar down about 0.5 per cent against the yen and the longer dated 20- and 40-year bond yields up to their highest in a month.

While the move was in line with the BoJ’s subtle reduction in its bond buying, the so - called “stealth tapering”, traders said it highlighted how sensitive markets are to a pullback in the massive stimulus that has been the centrepiece of Prime Minister Shinzo Abe’s “Abenomics” policies of the past 4-½ years.

BoJ governor Haruhiko Kuroda has repeatedly dismissed the chance of withdrawing stimulus any time soon, even as some policymakers have recently expressed concerns over the perceived demerits of monetary easing, especially the hit on financial institutions’ profit margins.

The BoJ pledged in 2016 to guide short-term interest rates at minus 0.1 per cent and 10-year bond yields at around zero per cent.

It also keeps a loose pledge to raise its bond holdings at 80 trillion yen (RM2.85 trillion) per year, although the rise was only around 58 trillion last year, which some see as an effective tapering of the BOJ’s stimulus. Reuters