The BOJ owned half of the outstanding Japanese government bonds as of September 30th for the first time

The Bank of Japan held more than half of outstanding government bonds for the first time in late September, after stepping up purchases to keep bond yields low even as its counterparts began raising interest rates, data showed on Monday.

The BOJ owned 536 trillion yen, or 50.26 percent, of Japanese government bonds, which totaled 1,066 trillion yen. The Bank of Japan has offered to buy unlimited 10-year bonds to prevent the benchmark yield from rising above its 0.25 percent cap while yields continue to rise overseas.

Gobbling up government bonds has depressed borrowing costs for businesses and households, but the BOJ’s bulging balance sheet will pose a challenge if it decides to consider an exit. The central bank does not appear to be in a hurry to fine-tune its monetary easing policy.

In the six months to September, the BOJ posted an unrealized loss of 874.9 billion yen on its government bond holdings, the first under Governor Haruhiko Kuroda after bond prices fell amid global monetary tightening. Bond prices move inversely with yields.

The BOJ data also showed that Japanese household wealth totaled 2.005 trillion yen, up 0.8 percent year-on-year. The number stayed above the 2,000 threshold for four quarters as many preferred to have cash on hand and consumption remained sluggish, a trend that continues amid the COVID-19 pandemic.

Japanese Prime Minister Fumio Kishida is trying to increase households’ income from financial assets by encouraging them to spend more money by investing in riskier assets such as stocks and mutual funds.

Wealth held in cash and deposits accounted for nearly 55 percent of total household wealth, rising 2.5 percent to 1,100 trillion yen. Other types of investments, such as stocks and mutual funds, declined. Stocks fell 8.1 percent to 196 trillion yen and mutual funds fell 1.7 percent to 86 trillion yen.


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