The Bank of Japan bought 23.69 trillion yen ($182 billion) worth of Japanese government bonds in January, a monthly record, after scrambling to defend its newly set yield ceiling on 10-year debt and curb market speculation of monetary tightening, the central bank's data showed Wednesday.
The monthly purchase amount exceeded the previous record of 16.20 trillion yen in June last year as the BOJ tried to counter increased bond sales in the market caused by its yield control policy.
In December, the BOJ surprised financial markets by widening the trading range for 10-year bond yields, prompting the yen to rise and the benchmark yield to jump. Bond yields move inversely to prices.
The BOJ's massive holdings of government bonds mean a difficult road ahead when it decides to scale back its monetary easing. Critics have taken issue with the central bank owning roughly half of the outstanding government debt, which effectively finances public spending.
The BOJ sets short-term interest rates at minus 0.1 percent and guides 10-year yields at around zero. The 10-year yield has been allowed to trade between minus 0.5 percent and 0.5 percent since late December, a decision that the BOJ said was intended to improve market functioning and rectify a situation whereby 10-year yields were sharply lower than those with different maturities.
To defend the 0.5 percent cap, the BOJ has been offering to buy unlimited amounts of 10-year bonds at a fixed rate of 0.5 percent every business day, in principle.
In its January policy-setting meeting, the BOJ left its monetary policy unchanged in defiance of market pressure to tweak it. Governor Haruhiko Kuroda, whose current term ends in April, said earlier this week that ultralow rates are still necessary to support wage growth and attain its 2 percent inflation target stably.
The BOJ has been a laggard as other central banks in major economies have already begun raising interest rates to fight inflation. Following the BOJ's recent expansion of the yield trade band, financial markets are still rife with speculation that the BOJ will shift to a tighter monetary policy, with attention on who will succeed Kuroda.
