BOJ Cuts Size of 5-10 Yr JGB Buying To Y410 Bln From Y440 Bln

     TOKYO (MNI) - The Bank of Japan on Friday reduced the size of its purchases

of Japanese government bonds with a remaining life of 5- to 10-years to Y410

billion per operation from Y440 billion, as largely expected.

     The cut in JGB buying, the first since Aug. 16, is aimed at preventing the

10-year bond yield from falling further amid continued tight supply-demand

conditions.

     The 10-year bond yield fell to 0.020% Thursday, the lowest level since May

2. Under its yield curve control policy, the BOJ is targeting a 10-year yield of

around zero percent. 

     After the operation Friday, 10-year bonds traded at 0.020%. There was no

trading in these bonds prior to the BOJ operation.

     The BOJ wants to slow the rise in its Japan government bond holdings to

make an eventual unwinding of its aggressive easing policy smoother but is being

extra careful to ensure that smaller JGB purchases do not ignite a rise in the

yen exchange rate.

     Before the operation Friday, BOJ officials were worried that lowering the

scale of its JGB buying might prompt yen buying but the yen eased slightly after

firming overnight.

     The BOJ first increased the scale of its purchases in the 5- to 10-year

zone in early July after the 10-year yield rose to 0.105%, well above the BOJ's

target. It raised the per-operation purchase amount to Y500 billion on July 7

from the Y450 billion level that had been in place since Jan 27.

     On July 24, it reduced the pace to Y470 billion after the 10-year yield

fell to 0.065%, cutting it further to Y440 billion on Aug. 16 after the

long-term interest rate slipped to 0.040%.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MMJBJ$,M$A$$$,M$J$$$,M$$FI$,MN$FI$]