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Mr. JGB Says Markets Need To Prepare For BOJ Buying Fewer Bonds (BBG)

JGBS

Michio Saito (also known as Mr. JGB), who serves as the director-general of the Japanese MoF’s financial bureau, has told BBG that “investors should start preparing for a return to normal Japanese bond trading as the central bank will one day step back from its debt purchases

  • Saito noted that “the Ministry of Finance has already started looking into a comprehensive review to ensure there’s sufficient depth and liquidity in the market as it’s only a matter of time before activity is allowed to normalize once again.”
  • “I don’t know when exactly, but the time will eventually come when the central bank is no longer the main buyer of JGBs,” he said.
  • Saito highlighted the point that the ministry review that he is overseeing includes a study of overseas debt-management, with an eye on measures that could be implemented to improve market functioning.
  • He also said “my term is just a year, so I’d like to use it to organize tools in preparation for when the JGB market starts really moving again. Whether or not the market starts regaining activity while I’m in my current role is unclear, but as someone who has been involved in debt management policy for so long, I want to make sure we’re prepared.”
  • “It isn’t desirable for JGB markets to destabilize or to see excessively high volatility. I’ll exchange views thoroughly with the BOJ to ensure markets are stable and function smoothly and see what we can each do.”
  • In terms of JGB curve extension he told BBG “I would be cautious about issuing 50-year JGBs in light of nurturing zones with higher liquidity, as there are already three super-long JGBs, those with 20-, 30- and 40-year maturities. Demand for other sectors will be eroded if 50-year bonds are issued amid a limited investor base.”
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Michio Saito (also known as Mr. JGB), who serves as the director-general of the Japanese MoF’s financial bureau, has told BBG that “investors should start preparing for a return to normal Japanese bond trading as the central bank will one day step back from its debt purchases

  • Saito noted that “the Ministry of Finance has already started looking into a comprehensive review to ensure there’s sufficient depth and liquidity in the market as it’s only a matter of time before activity is allowed to normalize once again.”
  • “I don’t know when exactly, but the time will eventually come when the central bank is no longer the main buyer of JGBs,” he said.
  • Saito highlighted the point that the ministry review that he is overseeing includes a study of overseas debt-management, with an eye on measures that could be implemented to improve market functioning.
  • He also said “my term is just a year, so I’d like to use it to organize tools in preparation for when the JGB market starts really moving again. Whether or not the market starts regaining activity while I’m in my current role is unclear, but as someone who has been involved in debt management policy for so long, I want to make sure we’re prepared.”
  • “It isn’t desirable for JGB markets to destabilize or to see excessively high volatility. I’ll exchange views thoroughly with the BOJ to ensure markets are stable and function smoothly and see what we can each do.”
  • In terms of JGB curve extension he told BBG “I would be cautious about issuing 50-year JGBs in light of nurturing zones with higher liquidity, as there are already three super-long JGBs, those with 20-, 30- and 40-year maturities. Demand for other sectors will be eroded if 50-year bonds are issued amid a limited investor base.”