TOKYO -- Bank of Tokyo-Mitsubishi UFJ's decision to quit as a primary dealer of Japanese government bonds highlights how negative interest rates have driven a wedge between the government and banks in the sovereign bond market.
Private-sector banks used to purchase Japan's growing national debt, which the Bank of Japan would then take off their hands as needed to stabilize the market. But the central bank has been snapping up massive amounts of Japanese government bonds lately and even introduced negative rates in February. The BOJ hopes that lowering yields on JGBs would lead to lower borrowing rates for households and companies, which in turn would bolster the economy.
