BOJ chief Ueda says JGB buying aimed at meeting price goal, not monetising debt

By Tetsushi Kajimoto

TOKYO (Reuters) – The Bank of Japan (BOJ) is buying Japanese government bonds (JGBs) as part of efforts to achieve its 2% inflation target, not to monetise debt, Governor Kazuo Ueda said on Tuesday.

“The BOJ’s JGB purchases are managed out of the need of conducting monetary policy with the aim of achieving the 2% price stability target,” Ueda told the lower house financial committee of parliament. “We have no intention of helping the government acquire financial sources.”

As part of its yield control policy and quantitative easing, the central bank purchases a massive amount of JGBs as well as risky assets such as exchange-traded funds and real estate investment trusts.

In his first appearance in parliament since assuming office on April 9, Ueda faced lawmakers’ questions on fiscal issues, as Japan scrambles to fund its plan to double defence outlays amid growing security concerns about China and North Korea.

Some ruling party lawmakers are considering extending a 60-year redemption rule for government debt to 80 years in order to create fiscal space even further.

“Fiscal management is under the jurisdiction of government and parliament so I won’t comment,” Ueda said.

“Generally speaking, market interest rates are determined by various factors including economy and prices and market sentiment as well as supply-demand of JGBs,” Ueda added.

“Even if the redemption rule is reviewed it would be very difficult to assume what kind of impact that would cause.”

Speaking at the same parliament session, Finance Minister Shunichi Suzuki said the finance ministry was not specifically considering reviewing the debt redemption rule for now.

(Reporting by Tetsushi Kajimoto; Editing by Christopher Cushing and Sam Holmes)