Foreigners make record weekly JGB sale after BOJ tweaks policy


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TOKYO — Foreign investors made the biggest weekly sale of Japanese government bonds last month, when the Bank of Japan (BOJ) shocked markets with a surprise tweak to its bond yield control.

Data from Japan’s Ministry of Finance show that foreign investors sold a net 4.86 trillion yen ($37.16 billion) worth of JGBs with maturities of more than one year in the week ended Dec. 24.

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This is the largest amount since the ministry began publishing data in 2005.

This also surpassed the 4.81 trillion yen of sales in a week in June, after Japanese bond yields climbed when rising inflation in the U.S. spurred bets for bigger rate hikes from the Federal Reserve.

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The selloff underscores investors’ bets that the BOJ would need to tweak its ultra-low rate policy further as consumer prices have been rising in Japan.

“Investors built up short positions as they expected additional tweaks (in the BOJ’s policy),” said Ataru Okumura, strategist at SMBC Nikko Securities.

In a surprise move on Dec. 20, the BOJ decided to widen the allowance band around its benchmark 10-year Japanese government bond target to 0.5% from 0.25%, fueling speculation that the bank would review its monetary policy.

The 10-year government bond yield rose to 0.48% in that week, its highest since July 2015, while the two-year JGB yield turned positive for the first time in seven years.

Yields have been on the rise since the tweak, prompting the BOJ to conduct emergency bond-buying operations for the fourth straight session up to Wednesday.

The BOJ is considering raising its inflation forecasts in this month to show price growth close to its 2% target in fiscal 2023 and 2024, local media reported last week, giving further upward pressure on bond yields.

The central bank is scheduled to hold a two-day policy meeting on Jan. 17 and 18. ($1 = 130.7700 yen) (Reporting by Junko Fujita; Editing by Janane Venkatraman)


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