— BOJ Ishida: Should Avoid BOJ Underwriting of Govt Debt

TOKYO (MNI) – Bank of Japan board member Sayuri Shirai said on
Wednesday that underwriting of government debt by central banks would be
undesirable, although that she is aware that the economy has been hit by
the March earthquake disaster.

“Underwriting of government debt by central banks would be
undesirable, Shirai told the House of Representatives Financial Affairs
Committee.

“I’m familiar with European financial markets. European authorities
are prohibited from underwriting government debt. I understand that the
current economic and financial conditions in Japan are severe, but (BOJ)
underwriting government debt would be undesirable.”

Another BOJ board member, Koji Ishida, also voiced objections to
the request from some lawmakers that the BOJ should buy JGBs directly
from the government, instead of through financial markets, in order to
help finance fiscal spending on rebuilding the disaster zone.

Japan’s Public Finance Act bans underwriting of government debt by
the central bank.

“Central banks around the world don’t underwrite government debt.
Should (the BOJ) underwrite government debt, it would be received
negatively by ratings agencies and market participants,” he told the
same lower house committee.

Ishida added that BOJ underwriting of JGBs would destabilize
government bond markets.

Shirai, 48, began her five-year term on the nine-member BOJ board
on April 1. She was an economics professor and replaced Miyako Suda, who
served on the board for 10 years through March 31.

Meanwhile, Ishida, 64, joined the board on June 30 from Sumitomo
Mitsui Financial Group. He replaced Tadao Noda, a former banker from
Mizuho Financial Group, whose five-year term ended on June 16.

tokyo@marketnews.com
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