Besides long term JGBs, the fund has bought commercial paper and Tokyo-listed ETFs and REITs.
More dramatically still, on the same respective dates the yield on long term JGBs were 1.53% and 0.65%.
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The government can sell the JGBs to an intermediate organization, which then the Bank of Japan buys from.
To overcome this resistance, the proposed fund would maintain the same allocation to JGBs as the current one.
Japanese bank holdings of JGBs now account for 25% of bank assets, five times the developed world average.
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Surprisingly, the BoJ will buy JGBs up to a maturity of 40 years.
The Bank of Japan is definitely not going to buy, to underwrite, JGBs.
China bought more JGBs than it sold for the first half of the year, the biggest annual increase since 2005.
"It's not that people want to buy JGBs today, it's that they have to buy, " said Mizuho Securities strategist Teruyoshi Sotome.
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You really are relying on the private sector to increase its purchases of Japan Government Bonds (JGBs) by at least 80% and probably 100%.
According to Bass, while the losses will be greatest for direct or indirect holders of JGBs, all yen assets classes will plunge, including equities.
"Some market participants wonder if the BOJ is able to purchase these JGBs in practice, " BOJ Gov. Haruhiko Kuroda said at a seminar on Friday.
As to who is or would buy JGBs, the answer for the present and foreseeable near term future is: the Bank of Japan.
Any long-term shift away from JGBs may have broader fiscal consequences.
As long term interest rates declined, the three big banks were able to score trading profits in JGBs three or four times greater than a year earlier.
For years, foreign hedge funds have bet against JGBs as the nation's debt climbed and the BOJ ratcheted up its easing, stoking fears of hyperinflation that hasn't materialized.
Japan also has the ability to mobilize the investment accounts of nationalized banks and insurance companies (Yucho, Kampo), which have accumulated over 300 trillion yen of JGBs in the last decade.
It also raises the sobering prospect that a rotation out of JGBs could come long before other parts of Abenomics have begun and a durable economic expansion that lifts revenues has taken hold.
The argument of Panglossian observers has always been that because almost all JGBs are held domestically, Japan is relatively insulated from the type of market turmoil and stresses we see now in Europe.
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Several dealers said they had heard the market movements even prompted a large Japanese bank to sell a huge amount of JGBs on Friday, contributing to the temporary drop in prices and spike in yields.
Mr. Yoshino said if the BOJ gobbles up JGBs for two or three more years, the market will suffer as either confidence in fiscal management erodes or investors start to speculate about an end to the easing.
"Speaking in terms of JGB investments, investors who need yield will ultimately extend the maturity of JGBs they are buying, and those who don't want to do that or can't do that will buy other things like foreign bonds or credit, and in some cases equity, " said Kenji Sakaguchi, chief investment officer at Prudential Investment Management Japan Co.
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