The Bank of Japan is becoming increasingly concerned its massive government bond purchases are drying up market liquidity, six months after investors warned that conditions were deteriorating.
The BOJ this week expanded its liquidity-providing facility to include treasury bills, whose yields below zero across maturities ranging up to one year point to demand that far outweighs supply.
A sale of three-month securities Thursday produced a negative average yield for an eleventh straight auction since June. The amount of T-bills circulating in the market contracted to the least since the central bank unveiled record stimulus in April 2013, according to Totan Research Co.