TOKYO (Reuters) - The Bank of Japan said on Thursday that it will buy long-term government debt under its expanded quantitative easing in eight to 10 tranches in June as the central bank increases the frequency of purchases to reduce volatility in the market.
The BOJ also said purchases would total more than 7 trillion yen ($69.37 billion), but added it would adjust the amount depending on market moves, according to a statement.
In addition to more frequent debt purchases, the BOJ is allowing itself more leeway to buy debt with maturities from one to five years, after bond dealers expressed concerns about the volatility on that part of the yield curve.
Institutional investors asked the BOJ on Wednesday to increase the frequency of Japanese government debt (JGB) purchases. It was the central bank’s third meeting with market participants since it overhauled monetary policy last month.
The BOJ said that from here on it will buy 3 to 4.2 trillion yen in JGBs per month with maturities from one to five years.
This is higher than the 3 to 3.5 trillion yen range planned for this month.
For debt maturing in five to 10 years, the BOJ’s monthly purchases will now total 2.7 to 3.6 trillion yen.
The BOJ also said monthly purchases of JGBs with maturities more than 10 years will total 1 to 1.5 trillion yen.
The yield on the benchmark 10-year JGBs fell 5.0 basis points to 0.890 percent on Thursday, distancing itself further from a 13-month high of 1 percent hit a week ago.
In April, the BOJ launched a new quantitative and qualitative easing plan intended to achieve 2 percent inflation in two years.
The BOJ’s strategy, which Governor Haruhiko Kuroda initially said would push rates down across the yield curve, rests on buying around 7.5 trillion yen of long-term government bonds per month, which accounts for roughly 70 percent of newly issued government debt.
The size of the BOJ’s purchases caused some investors to worry about declining liquidity, which helped push up Japanese government bond JGB yields. A rise in U.S. Treasury yields compounded the problem, causing JGB yields to rise further. ($1 = 100.9150 Japanese yen)
Reporting by Stanley White; Editing by Kim Coghill