Bids fall short in BOJ's emergency bond purchase auction+

TOKYO, March 4 Kyodo - The Bank of Japan said Wednesday it will purchase outright 44.9 billion yen (around $452 million) worth of corporate bonds from financial institutions next week, with its emergency auction seeing bids fall far below the central bank's
offer to buy up to 150 billion yen worth of bonds.

The fund-supply auction, the first of its kind held by the central bank, was
aimed at facilitating corporate financing, which is under severe pressure amid
the global credit crunch.
The shortage of bids was apparently due to some conditions for outright
purchase set by the BOJ.
The central bank said last month it would conduct several auctions to purchase
up to 1 trillion yen worth of corporate bonds with single-A ratings or higher
and residual maturities of up to one year. Based on the results of the first
round of the auctions, the BOJ will provide funds to financial institutions
Monday.
Many Japanese firms have faced difficulties raising operating capital in
financial markets given the worldwide credit turmoil.
The temporary bond-buying operation, effective through September, is part of
the BOJ's emergency policy measures to bolster the financial standing of
financial institutions and to encourage them to lend more to businesses even at
a time of crisis.
The measures also include the outright purchase of commercial paper, or
short-term debut issued by companies, from banks and other institutions as
firms rush for cash to cover the approaching end of the current business year
through this month.
On Wednesday, however, Miyako Suda, a member of the BOJ's Policy Board,
reiterated her opposition to the outright purchase of corporate bonds, saying
it is too early to implement the policy which she said could lead to a
deterioration in the central bank's financial health.
Speaking at a meeting of local business leaders in Kyoto Prefecture, Suda, who
opposed the measure at the bank's last policy meeting on Feb. 19 when the seven
other board members supported it, said the measure ''does not suit (the bank's)
needs.''
She underlined that by purchasing corporate debt, the BOJ is taking on credit
risk that could damage its financial health as well as the ''credibility of its
monetary policies.''
''If a central bank intervenes in individual financial markets too much, it
could result in a distortion of resource allocation within the economy'' as a
whole, she said.
The loss of functioning in the corporate bond market could be addressed by the
BOJ supplementing the functions of other debt markets such as the market for
commercial paper, she added.
Suda did not oppose the earlier introduction of the outright purchase of CP by
the BOJ.
==Kyodo