The Bank of Japan will be stepping up its unprecedented bond purchases, whether or not it expands its stimulus program this week, Bloomberg reported.
BOJ governor Haruhiko Kuroda’s quantitative easing program is now two-and-a-half years old.
Redemptions of previously purchased debt mean reinvestment must be added to the BOJ’s regular monthly purchases so it can stay on course to expand the monetary base by 80 trillion yen (US$665 billion) per year.
The monthly average amount of bonds the BOJ bought in the quarter to Sept. 30 was 9.3 trillion yen, up from 9 trillion yen in the three months to March 31.
The self-propagating nature of the easing program threatens to drain more and more liquidity from a Japanese government bond market in which trading among investors excluding the central bank and government-related agencies has dropped 38 percent over the past year.
The BOJ’s share of government debt outstanding will swell to half the market by 2017 from about 29 percent in June, even without an expansion of stimulus, separate estimates from Bank of America Corp. and BNP Paribas SA show.
Japan’s quantitative easing program has already gone on longer than the two years Kuroda initially envisaged when he launched it in April 2013.
The central bank chief may need to extend the deadline again, as none of the economists surveyed in a Bloomberg survey conducted Sept. 29-Oct. 2 projected he will achieve his goal of stable 2 percent inflation by the six-month period ending September next year.
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