BOJ Injects ¥1 trillion into Money Market to Curb Interest Rates
16:49 JST, January 24, 2023
TOKYO (Jiji Press) — The Bank of Japan on Monday conducted a money market operation to supply ¥1 trillion to financial institutions for five years against pooled collateral as part of its efforts to rein in interest rates.
Through such operations for providing low-interest liquidity, the central bank hopes to spur buying of five-year Japanese government notes.
The move came in line with the BOJ’s decision to expand its money market operations. The decision was made at its two-day policy-setting meeting through Wednesday, in which the bank also kept its ultraeasy monetary policy unchanged.
The BOJ’s massive purchases of 10-year Japanese government bonds, whose yields are regarded as Japan’s benchmark long-term interest rates, have resulted in the yield curve being distorted. Yields are usually higher for issues with longer maturity, but the BOJ’s massive buying has led 10-year JGB yields to fall to unnaturally low levels.
In Monday’s operation, which was aimed at correcting this distortion, the BOJ received tenders totaling ¥3.12 trillion against its offer to lend ¥1 trillion. The central bank accepted ¥1.0003 trillion, with the average interest rate for the successful bids coming to 0.145%.
Declines were seen mainly in medium- to long-term interest rates after the operation, with the yield for the newest 10-year JGBs at 0.375%, down 0.025 percentage point from late Friday.
An official at a Japanese securities firm said, however, that the operation’s effects in holding down interest rate will be temporary.
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