The Bank of Japan owned a record 52.02 percent of outstanding Japanese government bonds at the end of December, as the central bank was forced to ramp up purchases to defend its cap on long-term yields, data showed Friday.
The BOJ's holdings came to 546.93 trillion yen ($4.1 trillion) while the total amount of outstanding government debt was at 1,051 trillion yen. The ownership level rose from that of three months earlier when it crossed the 50 percent mark for the first time, according to the BOJ data.
While the world's major central banks went ahead with aggressive interest rate hikes to fight inflation, higher overseas bond yields added upward pressure on the BOJ last year.
The BOJ, the most dovish central bank among the Group of Seven industrialized nations, stunned financial markets by raising the yield cap on 10-year bonds to 0.5 percent from 0.25 percent in December, fueling speculation of a shift toward monetary tightening.
To defend its upper ceiling, the BOJ has been offering to buy unlimited amounts of 10-year bonds at a fixed rate of 0.5 percent. Bond yields move inversely to prices.
Facing criticism about market distortions due to its huge presence in the bond market, the central bank aimed to improve the functioning of the market through the December decision, but it was forced to increase bond buying to keep the yield in the target range as a result.
The BOJ's program to keep both short-term and long-term interest rates low is designed to support the economy, but critics say it has allowed the government to loosen its fiscal discipline while the central bank's balance sheet becomes increasingly bloated.
Incoming BOJ Governor Kazuo Ueda will face the challenge of charting a path toward policy normalization when its target of 2 percent inflation is achieved in a stable manner.
The BOJ data also showed assets held by Japanese households hit 2,023 trillion yen at the end of December, remaining above the 2,000-trillion mark for the fifth straight quarter. More than half of the total was held in cash and deposits, a reflection of Japanese people's cautious stance on spending.