MNI INSIGHT: BOJ Could Cut Monthly Long-Term JGB Buys

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan may trim monthly long-term JGB purchases,

as global economic uncertainty boosts foreign demand for longer-term government

bonds, and could act as early as Wednesday, when it announces its August

operations schedule, MNI understands.

     The BOJ currently offers to buy Y480 billion JGBs with a remaining life of

5-to-10 years four times a month to ensure proper market functioning, but it

could reduce the amount offered in each auction as a result of strong demand for

Japanese debt. Foreign players who have until recently concentrated on Japan's

Treasury discount bills are now increasing purchases of long-term JGBs,

tightening conditions in the 5- to 10-year zone.

     As global yields fall along the curve, the BOJ is also considering lowering

purchases of JGBs with a remaining life of 3- to-5 years from Y380 billion an

auction.

     In addition, the Bank will closely monitor investor reactions ahead of an

expected Federal Reserve rate cut, to come after Japanese markets close on

Wednesday.

     BOJ officials say daily open market operations are not a guide to monetary

policy, a point widely understood by domestic market practitioners.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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