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The Bank of Japan has published detailed schedules of planned asset purchases for the first time as it seeks to prove its commitment to a zero per cent cap on ten-year bond yields.

Japan’s central bank said it will buy a minimum of ¥1,375bn and a maximum of ¥2,175bn of government bonds during March, giving a series of dates and estimated sizes for its planned bond auctions at different maturities.

Setting out the purchase plan in advance makes it less likely that the BoJ will skip an auction – a common subject of market speculation as the central bank accumulates an ever larger share of outstanding government bonds through its programme of monetary easing.

The BoJ gave a strong hint that its announcement is meant to signal a minimum plan for purchases, rather than a maximum, saying it “may increase the frequency as needed”.

“The Bank will conduct purchases in a flexible manner, taking account of market conditions, aiming to achieve the target level of a long-term interest rate specified by the guideline for market operations,” it said. A rally in bond yields since the election of Donald Trump in the US has forced the Bank to step in to defend its yield cap.

In a note before the BoJ announced its plan, Citi analyst Tomohisa Fujiki said it was unclear what the central bank will do if the balance of supply and demand in the JGB market tightens. “The Bank may be forced to make purchases at excessively low yields,” he said.

As well as plans for its JGB buying, the BoJ also set out a schedule for purchases of commercial paper and corporate bonds running through to April.

Even though the BoJ shifted to the yield curve cap last September as its main monetary policy tool, it is still purchasing bonds at a pace of around ¥80trn a year, requiring an intensive schedule of auctions.

Those purchases have given it the largest balance sheet of any central bank in the world relative to the size of the economy.

Copyright The Financial Times Limited 2017. All rights reserved.
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