Negative JGB Yields A Growing Possibility At BOJ Ops

TOKYO (Nikkei)--The chances are increasing that yields on Japanese government bonds purchased from financial institutions by the Bank of Japan will fall below zero.

Speculating that the BOJ will take bold easing steps under its incoming governor, commercial banks are avidly bidding in the central bank's outright JGB purchases with prices above market value, pushing down yields.

In the BOJ's purchases Monday of JGBs with less than one year left to maturity, the return on successful bids apparently came to almost 0%.

The central bank waived the 0.1% minimum yield for longer-term JGBs in its purchases last September. It also revised the system so that commercial banks can bid with negative yields.

For the BOJ, purchases at negative yields poses the high likelihood of losses because it would buy government debt at a higher price than the par value.

Still, the central bank is "determined to keep the promise of implementing monetary easing and will continue purchasing bonds even at negative yields," says a senior official.

(The Nikkei, March 6 morning edition)

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