The Bank of Japan (BOJ) may buy lower-rated corporate debt as part of its latest program to help companies borrow cash and support the economy, three people with direct knowledge of the discussions said.
The BOJ will likely consider purchasing BBB-rated corporate bonds and a-2 commercial paper at a policy meeting on Thursday, according to the people, who spoke on condition of anonymity because the deliberations are private. The purchases would come under a ¥5 trillion (US$61 billion) program unveiled by the bank on Oct. 5 that includes government bonds, exchange-traded funds and real--estate investment trusts.
Japan’s central bank is expanding monetary easing to shore up a recovery that is under threat from deflation and the yen’s climb to a 15-year high. Buying lower-grade securities would go beyond the bank’s corporate debt purchases last year that followed the collapse of Lehman Brothers Holdings Inc and were restricted to bonds rated A or higher and a-1 commercial paper.
“The purpose of the BOJ’s latest effort is very different from its post-Lehman program, which was aimed at restoring the function of the market,” said Toshiyasu Ohashi, chief credit analyst at Daiwa Securities Capital Markets in Tokyo. “This time, the BOJ is trying to push down credit risk premiums so it doesn’t make sense if it only buys high-rated debt.”
The Nikkei newspaper reported the central bank’s plans earlier yesterday.
With money-market rates already low, the central bank is turning to purchases of riskier assets to reduce borrowing costs, the policy board said when it announced the program this month, allocating ¥1 trillion of the fund to buy corporate debt.
The central bank’s shift comes even as some Japanese companies manage to sell lower-rated bonds. Construction business Maeda Corp and trading firm Sojitz Corp are among enterprises that issued BBB securities this month.
Governor Masaaki Shirakawa and his board unexpectedly lowered the benchmark interest rate to near zero at the Oct. 5 meeting and pledged to keep it there until “price stability is in sight.”
Policymakers will review their outlook for the economy and prices at Thursday’s gathering.
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