March 19 (Reuters) - Bank of Japan raised its holdings in Japanese government bonds by 3.3 percent to 51.56 trillion yen ($570.73 billion) in February, its highest level in more than two years, the Nikkei business daily reported.
The Japanese central bank aggressively bought sovereign debt to bring liquidity to the market, the paper said.
However, if such holdings continue to increase, BOJ may reconsider its policy of buying the bonds to ensure that the amount stays below the balance of bank notes in circulation as required by law, the paper said without citing sources.
The balance of bank notes in circulation has been showing slow growth, up 0.2 percent at 77.08 trillion yen at February 28, hurt by weak consumer spending, the business daily said.
The central bank is also cautious about increasing bond purchases to avoid speculation that the buying is being used to offset deficits and implies breakdown in fiscal discipline, a view that could raise long-term bond rates, the paper said.
The BOJ loosened monetary policy on Wednesday following government pressure for action to overcome deflation, though the decision came on a split vote and was seen as having limited economic impact.
($1=90.34 Yen)
(Reporting by Jochelle Mendonca in Bangalore; Editing by Gopakumar Warrier) Keywords: BANKOFJAPAN/ (jochelle.mendonca@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: jochelle.mendonca.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The Japanese central bank aggressively bought sovereign debt to bring liquidity to the market, the paper said.
However, if such holdings continue to increase, BOJ may reconsider its policy of buying the bonds to ensure that the amount stays below the balance of bank notes in circulation as required by law, the paper said without citing sources.
The balance of bank notes in circulation has been showing slow growth, up 0.2 percent at 77.08 trillion yen at February 28, hurt by weak consumer spending, the business daily said.
The central bank is also cautious about increasing bond purchases to avoid speculation that the buying is being used to offset deficits and implies breakdown in fiscal discipline, a view that could raise long-term bond rates, the paper said.
The BOJ loosened monetary policy on Wednesday following government pressure for action to overcome deflation, though the decision came on a split vote and was seen as having limited economic impact.
($1=90.34 Yen)
(Reporting by Jochelle Mendonca in Bangalore; Editing by Gopakumar Warrier) Keywords: BANKOFJAPAN/ (jochelle.mendonca@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: jochelle.mendonca.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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