More again from the Nikkei today, what they dub their "Bank of Japan Watch"

  • Until recently, the bank had tried to boost prices by pouring large amounts of money into the market
  • Bond-buying operations conducted two or three times a week further this goal. The BOJ buys Japanese government bonds en masse from institutional investors to send money into the market.

But the bank has moved in a different direction lately:

  • The first indicator was a fixed-rate funds-supplying operation against pooled collateral March 17. Rather than buying JGBs, the central bank offered interest-free loans using the notes as collateral. It took the unusual step of conducting two such operations simultaneously, offering three-month loans and -- for the first time -- two-week loans.
  • And the central bank bought government debt under repurchase agreements Friday. This was the BOJ's first such operation in five years.

These operations signal frustration within the central bank at the lack of a deep fall in short-term rates since the negative-rate policy was introduced. A market player commented that the BOJ's unwillingness to tolerate positive short-term rates came through loud and clear.

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