A new Bank of Japan board member, Koji Ishida, said on Wednesday the central bank should avoid directly underwriting government debt because doing so could destabilize financial markets.
The BOJ's underwriting government debt would give markets the impression that financial markets are having difficulty absorbing bonds and could trigger a sovereign rating downgrade by ratings agencies, Ishida said at a lower house parliament committee.
That would destabilize financial markets that are currently stable, so it should be avoided, Ishida said.
Sayuri Shirai, another new member of the BOJ's board, also reiterated the central bank's opposition toward underwriting government debt.
I know Japan is now faced with difficulties. But that is why it's important to ensure market trust in Japan's ability to manage its finances, she said.
(Reporting by Leika Kihara; Editing by Chris Gallagher)