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Bank of Japan to buy high risk debt

TOKYO, June 11 (UPI) -- The Bank of Japan will become the first modern central bank to buy junk-grade corporate debt.

The bank, in a Wednesday news release, said it expects the purchases, to begin by the end of July to promote "smooth corporate financing by reducing credit risks through ... diversification, as well as by relocating credit risks to investors with various risk preferences."

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The bank also says it expects to play an important role in the development of the asset-backed securities market by directly taking credit risks through purchases of asset-backed securities as a temporary measure.

The Wall Street Journal said the move could signal the Bank of Japan's new governor, Toshihiko Fukui, is more willing than his predecessor to take radical steps to reinflate the world's second-largest economy.

The newspaper said that with interest rates near zero and extra cash pumped into money markets sitting largely unused, the Bank of Japan has exhausted most conventional means of sparking demand with cheap funds.

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