BOJ scraps yield floor for ‘rinban’

Bloomberg

The Bank of Japan has scrapped its 0.1 percent yield floor for its purchases of government bonds as it sought to bolster flagging demand in its funding operations.

The central bank removed the limit on purchases of securities with maturities of one year or less in its “rinban” operation, or outright buying of Japan’s debt, BOJ spokesman Tsuyoshi Nakamura confirmed Wednesday. The change was implemented at the BOJ’s meeting on July 12 and communicated to banks and brokerages while not included in its policy decision release. Scrapping the yield floor means the BOJ can now buy debt at negative yields.

The revision is intended to attract enough sell offers when the BOJ conducts funding operations and highlights the central bank’s difficulty in executing its existing stimulus efforts. It failed to attract enough bids in its rinban purchases on July 6 for a second time since May, as banks chose to hang on to the bonds rather than take cash. A six-month funding operation also didn’t reach its bid goal for a 14th straight time on July 10.