The Bank of Japan bought one-year government bills at negative yields in market operations on Friday, traders said, setting a new milestone as it pushes its aggressive asset purchase scheme.
Although the BOJ suffers a loss by making such purchases, that has not hindered a central bank which is keen to show its determination to carry out its massive stimulus it hopes will bring up inflation to a target level of 2 percent.
The central bank does not disclose which issues it bought in its operation, but traders said the current one-year bills looked almost certain to be included among 1.75 trillion yen ($16 billion) of bills banks and brokers sold to the central bank.
The one-year bills were traded at -0.004 percent in the market on Thursday.
The BOJ has already bought shorter bills of up to six months at negative yields this month, paying financial institutions more for government debt than it will receive when the bills are redeemed, traders said.
Bill yields have dropped to record lows as the BOJ's massive buying led to a shortage of bills available to market players.
The BOJ launched a plan to print 60-70 trillion yen of money per year in April 2013, mostly by buying government bonds and bills, though it buys other assets such as stocks as well.
But some analysts say buying assets from markets is likely to become more difficult, if not impossible, due to the increasing scarcity of assets to buy, without resorting to extreme measures, such as buying discount bills at negative yields.
The pain for the BOJ is likely to ease after the end of September as banks are likely to stop hoarding bills after half-year book-closing on Sept 30.
Still, growing operational difficulties in market operations could be a headache for the BOJ, which may face the need for more stimulus steps early next year.
Although the BOJ has said its stimulus should help Japan's inflation reach its target by then, few economists think that will happen.
Earlier on Friday, Japan's government cut its overall economic assessment for the first time in five months as private consumption struggles to recover from the slump caused by a sales tax hike in April, clouding the outlook for a sustained recovery.
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