TOKYO -- The share of Japanese government bonds held by the Bank of Japan has topped 50%, hitting a new record high as the central bank has accelerated its debt purchases to hold down long-term interest rates.
The BOJ is buying up the majority of the JGBs on the market, an unusual situation that has resulted in distortions in the bond market where the interest rate on some short-term bonds is higher than that for long bonds, known as an inverted yield curve. The depreciation of the yen in the foreign exchange market has been accelerated by the BOJ's massive JGB buying. Market watchers say that the BOJ's continued easing can no longer be ignored.
The central bank has been buying JGBs without preset limits in line with its policy of keeping long-term interest rates at around 0.25%. The BOJ has to buy a large amount of JGBs because of the long-term interest rates in the U.S. and Europe.
The BOJ bought JGBs worth $110 billion in June, surpassing the 11.1 trillion yen it purchased in November 2002, its largest monthly total ever.
According to the QUICK database, the outstanding value of long-term JGBs was 1,021 as of June 20. On a face-value basis, the BOJ held 514.9 trillion yen of which it had 514.9 trillion yen. That translates to 50.4% of the total amount outstanding, up from 50.0% in February to March 2021.
When Gov., the JGB holdings of the central bank were in the 10% range. In 2013, Haruhiko Kuroda started the massive monetary easing program. The holdings of the ultraloose policy have continued to grow.
According to estimates from the Japan Center for Economic Research, the BOJ needs to increase its holdings by 120 trillion yen from the current level of over 500 trillion yen to keep interest rates at 0.25%. The central bank's JGB holdings are expected to exceed 60% of total.