Halister News

(Bloomberg) -- The Bank of Japan’s purchases of govt bonds may halve to 40t yen ($359b) next year from the current target of 80t yen, according to Bank of America Merrill Lynch and Mizuho Securities.

• BOJ’s current bond purchase guidance targets an annual increase of around 80t yen in the central bank’s bond holdings
• The pace may decelerate to about 60t yen this year as 43t yen worth of BOJ’s holdings come due within a year, says Shuichi Ohsaki, chief Japan rates strategist at BofAML
  • Barring a substantial change in economic and financial conditions, buying will further fall to 40t yen in 2018
  • Should BOJ stick to the 80t yen guidance, 10-year yield could slide to -0.4% by the end of next year, compared with the current target of zero
• Mizuho senior bond strategist Noriatsu Tanji estimates BOJ buying may decrease to 40t yen levels next year and to 30t yen levels in 2020, citing rising redemptions
  • The expected slowdown will balance out with govt’s issuance of new-financing bonds, keeping the amount of bonds in the market stable
• NOTE: Bloomberg analysis shows BOJ’s buying may decrease to 66t yen. The central bank has already cut buying for almost all maturities in the past 12 months

--With assistance from Masaki Kondo. To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net To contact the editors responsible for this story: Hidekiyo Sakihama at ksakihama@bloomberg.net Patricia Lui