TOKYO: The Bank of Japan’s offer to buy over US$28bil of government bills fell short of enticing enough sellers, the first failure since the BoJ began the current stimulus last year and a sign of the receding potency of its easing programme.
The failure underscores growing difficulties of force-feeding banks with liquidity as they become less eager to take cash from the BoJ in a faltering economy.
The BoJ’s offer to buy three trillion yen (US$28.23bil) of discount government bills yesterday attracted offers of only 2.622 trillion yen, the first time since May 2012 it has not been able to buy bills in the amount it has sought. It suggests banks are now not willing, or possibly just do not have government bills, to sell to the BoJ even at a negative yield level.
“This just shows the limit of the BoJ’s buying,” said a trader at a Japanese bank.
The failure set another unwanted milestone in the BoJ’s strategy to flood the financial system with money to revive a long-stagnant economy, and comes as analysts warn of increasing operational difficulties in sustaining the central bank’s aggressive easing.
The economy rebounded strongly last year but has since slowed over the past six months as a sales tax hike in April chilled consumption, while exports growth has remained lacklustre.
The BoJ launched its current “quantitative and qualitative” (QQE) easing in April last year, pledging to increase the monetary base, or the amount of money it provides to the economy, by 6070 trillion yen a year.
While the BoJ mainly buys government bonds to pump prime the economy, it also purchases other assets including government bills and risk assets such as stocks.
As the BoJ’s massive bills purchase had brought down government bill yields below zero, the central bank was last month forced to buy bills at negative yields even though it suffers a loss in doing so.
The three-month Japanese government bill yield has remained at zero or below since early September and the BoJ has even been buying the longest bills, one-year bills, at negative yield.
BoJ governor Haruhiko Kuroda has said he saw “no serious problems” in the QQE programme. But some analysts said operational problems could complicate his efforts to boost the economy with massive monetary easing. — Reuters