The Bank of Japan may soon be lending its portfolio of JGBs. At the regular Monetary Policy Meeting held at the central bank earlier this week, the possibility of introducing a bond lending facility was discussed.
“In government securities markets, liquidity may decline and pricing may be hampered occasionally when market participants experience difficulties in securing specific issues or face uncertainties over their availability,” said the Bank of Japan in a statement published on Thursday. “In such cases, market participants should strive to maintain market liquidity and to avert a negative impact on the markets. Furthermore, in many industrialized countries, central banks and other public authorities offer securities lending facilities as a secondary source of government securities to the markets.”
Policy Board members discussed the possibility of introducing a facility which will provide Japanese government securities held by the central bank to the markets, with a view to enhancing liquidity and maintaining the smooth functioning of the markets. The chairman instructed central bank staff to study the introduction of such a facility and report back to the MPM promptly.