The Bank of Japan bought a record ¥3.5tn of Japanese treasury bills as part of its efforts to help pick up inflation and it could be of the reasons why we’re seeing US bonds well bid and yields from rising.

The amount broke the previous record of ¥3tn in August report Bloomers.

“That was a big treasury bill operation. The banks were wanting to sell, so that’s probably why the BOJ increased its buying” said Toshiaki Terada, a researcher at Totan Research Co

The full story from Bloomberg is here and thanks to reader JC for giving the heads up.

With such willing selling the question is where does all the proceeds go? Abe & Co would like to see money flowing into riskier assets so there’s probably a sizeable drive into equities, both in Japan and abroad but a larger chunk could well be flowing straight across the Pacific and into US paper. Certainly there’s plenty of bond buying coming in as the expectant run to 3% in 10’s over the improving economy seems as far away as ever. Getting 2.4%-2.5% with 2% inflation may not sound like risk to you or me, but to the Japanese that might be like jumping off Mount Fuji in a bathtub.