[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ), Japan's central bank, has surpassed a 50% holding ratio of government bonds, marking an all-time high. This occurred as the BOJ, which has chosen a 'solo easing' strategy amid global interest rate hike pressures from the US, Europe, and others, massively purchased government bonds to prevent long-term interest rate increases. There are growing assessments that side effects from prolonged accommodative monetary policy are spreading.
On the 28th, Japan's Nihon Keizai Shimbun reported, citing data from market research firm QUICK, that as of the 20th, the outstanding amount of Japanese government bonds excluding short-term bonds was 1,021.1 trillion yen (approximately 971 trillion won), of which the BOJ held 514.9 trillion yen. Based on this, the BOJ's government bond holding ratio was 50.4%, surpassing the previous record high of 50.0% in February to March last year. When Haruhiko Kuroda, BOJ Governor, began large-scale monetary easing policies in 2013, the BOJ's government bond holding ratio was in the 10% range but has since risen rapidly.
The BOJ's government bond holding ratio is expected to expand further. Previously, the Japan Center for Economic Research estimated that to maintain long-term interest rates at 0.25%, the BOJ would need to increase its government bond holdings by an additional 120 trillion yen from 500 trillion yen at the end of March. Accordingly, Nihon Keizai reported that it seems realistic for the BOJ's government bond holding ratio to exceed 60%.
As the BOJ expands its government bond holdings, the amount held by private financial institutions is decreasing. As of the end of March, the holding ratio of government bonds by deposit-taking institutions such as banks was 11.4%, and by insurance companies and pension funds was 23.2%. Nihon Keizai described this as a "structure where the BOJ is solely bearing the risk of losses caused by rising long-term interest rates."
Recently, Japan has faced a rapid depreciation of the yen alongside high inflation, leading to assessments that the side effects of prolonged accommodative monetary policy are spreading. In particular, the fact that the central bank holds half of the government-issued bonds is considered an abnormal situation. This means that the central bank is covering the expanded fiscal deficit caused by the government's 'money printing.' Nihon Keizai pointed out, "The government needs to directly engage in reforms that promote economic growth, and companies should not rely on monetary easing but improve profitability."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
