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The Bank of Japan announced Friday that it will temporarily purchase government bonds to compensate for an expected funds shortage in the government’s “zaito” fiscal investment and loan program.

About 106 trillion yen in postal savings funds, which are used to finance the government’s zaito fiscal investment and loan program, is scheduled to mature in the two years beginning April 1.

Of the total, the government estimates that some 49 trillion yen will be withdrawn and shifted over to other financial instruments. If that happens, the government will have a serious zaito shortage that will force it to scale-down some of the nation’s long-term investment projects.

To prevent that from happening, the central bank will purchase government bonds held by the Finance Ministry’s Fiscal Trust Bureau, which operates zaito, using a repurchase agreement.

The operation effectively enables the BOJ to provide the government with short-term funds and give the bureau more time to raise money from the market.

Although the repurchase agreement calls for the bureau to buy back the bonds from the BOJ within three months, the central bank intends to extend that period if necessary.

An extension, however, might invite criticism that the operation is the same as the BOJ buying government bonds outright or underwriting them — both moves that the central bank has vehemently opposed on grounds that it will undermine its financial credibility.

BOJ officials, however, stressed that the measure is only temporary.

“The measure this time does not signal that the Bank of Japan is providing the government with fixed, long-term funds,” Nobuo Inaba, counselor at the central bank’s policy planning office, told reporters.

The BOJ officials did not specify the scale of the bond purchase or say how much of the loans could be rolled over or for how long. They noted that the scale of the bond buying will depend on the amount of postal funds the bureau loses.

The Finance Ministry meanwhile said that it does not plan any outright sale or sale without repurchase agreements of government bonds from the bureau.

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