November 6, 2014, 19:00 JST

BoJ owned 23% of the JGB market in October

BoJ added 7.8 trillion yen JGB to its balance sheet in October

With a hindsight, October was the last month the BoJ conducted its JGB purchase operation under the previous guideline announced in April 2013. In October 2014, the BoJ bought 7.8 trillion yen of JGBs, moderately above the guideline (7 trillion yen). The average maturity of JGB purchased in October was 6.4 years, moderate below the guideline (7 years).

 Source: BoJ, MoF, JMA.

From November on, the BoJ will be purchasing JGBs under the new guideline, 8 to 12 trillion yen per month with their maturity 7-10 years on average. By expanding the amount and extending its maturity, the BoJ will be almost doubling its firepower of its JGB purchase when measured in duration risk. With the short to medium term interest rates close to zero, the BoJ is targeting to push down long term interest rates. 10 year rate is already as low as 0.45%, but 30 year rate, at 1.52% as of November 6, it offers some room to be compressed.

 Source: BoJ, MoF, JMA.

BoJ owned 23% of the whole JGB market in October

In terms of its market share, BoJ owned 23.1% of the JGB market measured in value, and 18.2% measured in aggregate duration risk. Its market share is lower when computed in duration risk, as the average duration of JGB held by BoJ (5.3 years in October) is lower than the market average (6.6 years). 

We expect BoJ's market share will exceed 30% by the end of 2015, and approach 40% by the end of 2016. 

 Source: BoJ, MoF, JMA.