Buying foreign bonds will be unnecessary under the next Bank of Japan governor, Prime Minister Shinzo Abe said Wednesday, backing away from a proposal that other nations alleged was an attempt to weaken the yen.
“We decided to consider this (last) November,” Abe told an Upper House Budget Committee session, referring to a proposal by the Liberal Democratic Party to set up a fund to buy foreign bonds. The LDP was the main opposition party at the time. It returned to power in the December general election. “The need for this will basically disappear once we get the new BOJ governor and deputies in March.”
Avoiding foreign bond purchases would limit tension with other Group of 20 nations that pledged this week to refrain from targeting exchange rates for competitive purposes. The yen is swinging as investors assess the limits of the economic campaign dubbed “Abenomics” as Abe prepares to choose the next BOJ governor next week.
“This effectively removes foreign bond buying as a policy option for Abe,” said Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. “The G-20 statement suggests that aiming to guide the yen lower by verbal intervention or other means . . . cannot be accepted.”
The LDP, which Abe heads, last year proposed a fund to buy foreign bonds that would involve the BOJ, the Finance Ministry and private investors.