Japan Post Bank to buy more bonds in light of BOJ taper plan (updated)

Japan Post Bank

20/06/2024 08:57

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      Japan Post Bank to ramp up buying of 7-10 year JGB notes
    

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      Investment appetite likely to help keep bond yields stable
    

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      BOJ taper, rate hike prospects to alter banks' strategies
    

  
 (Adds context, background on BOJ policy in 8-13th paragraphs)
    By Takahiko Wada and Leika Kihara
       TOKYO, June 20 (Reuters) - Japan Post Bank said on
Thursday it will expand investment into long-term government
bonds to take advantage of rising yields from the central bank's
expected tapering of its huge bond purchases.
    The investment appetite by Japan Post Bank  7182.T , a
former state-owned giant with total assets of $1.5 trillion, may
help keep long-term interest rates low, even as the Bank of
Japan (BOJ) begins to trim bond purchases under a plan set for
release next month.
    "We have already begun shifting investment towards
government bonds from deposits in light of shifting trend in
Japan's interest rates," a public relations official at Japan
Post Bank said.
    "We plan to keep expanding investment mainly into long-term
Japanese government bonds (JGB)," or notes with 7-10 years of
maturity, taking into account the size of the BOJ's future bond
buying taper and the market fallout, the official said.
    The remarks came in response to a query by Reuters on how
the BOJ's quantitative tightening (QT) plan, due out next month,
could affect Japan Post Bank's investment strategy.
    As one of the country's biggest market players, Japan Post
Bank yields huge influence in the JGB market.
    It has ramped up investment in JGBs with the balance of
holdings totaling 5.15 trillion yen ($32.56 billion) as of
March, expanding 1.5-fold from levels in December last year.
    With inflation having exceeded its 2% target for two years,
the BOJ is steadily rolling back its massive stimulus programme.
    In March it ended a policy that capped long-term bond yields
around zero. Last week it decided to start trimming its bond
purchases and will announce a detailed plan at its July meeting
on reducing its nearly $5 trillion balance sheet.
    The diminishing presence of the BOJ, which now holds roughly
half of the total JGBs sold in the market, has heightened the
need for the government to find stable buyers of JGBs and avoid
a bond selloff that could trigger a damaging spike in yields.
    The government is laying the groundwork to sell shorter debt
to lure private banks into ramping up investment in JGBs.
    Many financial institutions, including Japan Post Bank, had
reduced JGB holdings during the BOJ's radical monetary easing
since 2013, which crushed yields they could earn from JGBs and
forced them to seek investment with higher returns.
    Japan Post Bank's renewed interest in JGBs highlights a
shift in domestic investors' strategy caused by growing
prospects of interest rate hikes by the BOJ.
    ($1 = 158.1700 yen)

 (Reporting by Takahiko Wada, additional reporting and writing
by Leika Kihara; Editing by Michael Perry)
 ((leika.kihara@thomsonreuters.com; +813-6441-1828; Reuters
Messaging: leika.kihara.reuters.com@reuters.net))