Japan Inc. May Soon Get Paid to Borrow in Commercial Paper Sales

Japan’s companies may soon get paid to borrow in the commercial paper market as brokers adjust to the Bank of Japan’s negative interest-rate policy.

The Japan Securities Depository Center will start an interim system Tuesday that will help settle commercial paper with minus rates. The Tanshi Kyokai, an association of brokers, announced over the weekend that it plans to have the capacity to handle transactions with sub-zero yields from today. The upgrades come more than a month after the BOJ started charging some lenders 0.1 percent on their excess reserves.

Japan’s central bank has stepped up its buying of commercial paper this year, increasing the planned size of monthly operations to 500 billion yen ($4.5 billion) as part of its effort to achieve a 2 percent inflation target. While CP rates may drop below zero sporadically, such levels are unlikely to take root because it will be hard for investors to time purchases before BOJ operations, said Kenji Sato, a manager at the planning and research department of Central Tanshi Co., a Tokyo-based money-market dealer and broker.

“There are no investors who would buy credit products with negative rates,” said Yoshihito Yasuda, a researcher at Tokyo Tanshi Co. “Risk is also high for dealers to take CP just to sell them back to the BOJ.”

Japan’s government was paid to borrow money for 10 years for the first time ever this month as yields on benchmark debt fell toward the record-low of minus 0.135 percent reached March 18. The unsecured overnight call rate dropped past zero for the first time in more than a decade on Feb. 17.

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