BOJ May Overhaul its Bond Purchases Program

By TraderVox.com

Tradervox (Dublin) – After losing that battle to deflate the yen due to reluctance of government bondholders, the Bank of Japan may be forced to overhaul its asset purchases program in its coming meeting on June 14-15. The meeting will be held just two days before Greece goes into an election which might ultimately seal its fate in the euro region. The crisis in the euro area has already forced the BOJ to miss its target for purchases twice last month. After a surge in the demand for riskier assets in market, safe haven demand has returned as investors await important reports next week.

Statements from Bank of America Merrill Lynch indicate that the current disruptions to the BOJ program has compounded the pressure on the Bank of Japan Governor Masaaki Shirakawa to establish effective measures to support the economy expected to slow after a good show in the first quarter. Masayuki Kichikiwa who is the Chief Economist for the bank added that the BOJ might be forced to extend bond maturity in the coming month. The BOJ extended the maturity of its two-year bonds to three years as a measure to ease long-run borrowing costs.

The Bank of Japan failed to raise enough one- and two-year notes it needed in May 16 and later failed to attract enough offers for bond buying operation. This is a reflection of the dampening demand for riskier assets as investors speculate Euro zone crisis will worsen. Analysts have predicted a souring outlook for global economy which has forced policy makers around the world to establish measures to curb any emergent issue. Some of the countries that have taken such measures include China, which has lowered its interest rate for the first time since 2008, Brazil, and the US is said to be considering stimulus.

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