REPEAT: MNI: BOJ Mulls Ways To Further Improve JGB Functioning

Repeats Story Initially Transmitted at 02:55 GMT Sep 21/22:55 EST Sep 20

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan officials are studying ways to further improve

the functioning in Japanese government bond markets and the BOJ stands ready to

change the guideline for monthly JGB purchases, MNI understands.

     Although it listens, the BOJ doesn't necessarily comply with requests from

bond market players, but the bank is examining whether it needs to change its

guideline to boost volatility and liquidity in bond markets.

     BOJ officials periodically meet with market players, not only to examine

developments in bond markets, but also to tease out issues that may need

addressing.

     --STAFF MATTER

     Changing guidelines isn't a matter of policy decision by board members and

BOJ officials in charge of daily operations can adapt the guideline in a

flexible manner.

     However, BOJ officials are still opposed to fully discontinuing the

guideline, keeping in place announced days that the BOJ will conducts operation,

the number of operations and the bond buying amount range.

     At the July 30-31 meeting, the BOJ board voted 7-to-2 to make its long-term

interest rate target and asset purchase scheme more "flexible," allowing the

nearly flat Japanese government bond yield to steepen slightly in line with

firmer growth and inflation.

     The bank "strengthened" the framework, allowing a wider trading range of

+0.2% to -0.2% for the 10-year JGB yield, double the previous, unofficial range

of +0.1% to -0.1%.

     --WATCHING JULY EFFECTS

     BOJ officials believe it will take time to see how the July decisions

contribute to improving bond market functionality.

     The BOJ has been publishing a calendar of days the bank plans to conduct

its bond buying operations to reduce the volatility in bond markets since March

2017, as the JGB market was plagued by volatile bond prices amid high

uncertainties.

     As a result, JGB volatility has fallen significantly and the BOJ decision

was broadly welcomed by the market. But the drop in liquidity and volatility has

reduced brokers' ability to make profits and conditions have changed with the

passage of time.

--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