REPEAT: MNI: BOJ Total JGB Buys Unch To Ease Offshore Fears

Repeats Story Initially Transmitted at 01:50 GMT Jul 3/21:50 EST Jul 2

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan increased the upper limit of its total

monthly JGB purchases in the 1- to 3-year bucket so as to leave overall monthly

purchases across the curve unchanged and not send out messages that could be

read by some as the central bank paring back on its easy policy, therefore

sending the yen higher, MNI understands.

     Having reduced total purchases in both the 3 to 5-year and the 10 to

25-year buckets, the BOJ looked to offset with increased monthly buys at the

front-end of the curve, mainly to avoid a misunderstanding of their actions by

overseas investors.

     Officials in charge of monetary policy understand the risk that lowering

the scale of the total bond buying could be misinterpreted by foreign players as

the BOJ intentionally reducing JGB buying, thus triggering a yen rise.

     Late last month, the BOJ cut the upper end of both the 3/5 and 10/25-year

buckets by Y50 billion to Y500 billion and Y250 billion respectively. At the

same time, it increased the upper end of the 1/3-year range to Y500 billion, a

move reflected in Tuesday's operations.

     --CLOSE WATCH

     The BOJ will offer to buy medium- and super long-term JGBs on Wednesday and

a close eye will be kept on how foreign players respond, with their reaction

likely to be a factor in future policy actions and statements

     The BOJ in part amended its forward guidance in April due to feedback from

overseas investors who felt the promise to maintain easy policy "for an extended

period of time" could end quickly after the Japanese government carried out the

consumption tax hike in October.

     The updated guidance said the BOJ intended to keep rates low for an

extended period of time, "at least through around spring 2020", specifically

pointing to the sales tax hike as an event that needed watching.

     In discussions with Bank officials, no Japanese market participants had

expected the easy policy to end straight after the sales tax hike, as there was

a general acceptance that the initial impacts into Q1 2020 would have to be

seen.

     But those same officials received less certain responses from overseas

players that easy policy would be maintained, persuading the BOJ to offer

clearer and stronger guidance that it would last into next year at least.

--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