Japan to buy bonds to support eurozone

Japan yesterday said it would buy bonds from a eurozone rescue fund to help finance Ireland’s bailout and support the debt-hit bloc, following similar overtures from China amid fears of a spreading crisis.

Finance minister Yoshihiko Noda said Japan should help boost confidence in the bonds issued by the European Finan-cial Stability Facility as concerns grow for nations such as Portu-gal.

In pledging such purchases Japan is joining China, which has already expressed readiness to assist European economies seen as most exposed to a debt crisis by pledging to buy bonds directly from Spain, Greece and Portugal.

“It is appropriate for Japan, as a major economy, to buy some of the EFSF bonds” to help boost confidence in Europe’s efforts, Mr Noda said.

“We’re thinking about buying more than 20 per cent of the amount of EFSF securities to be issued in the initial round,” he said.

The euro soared following Noda’s comments before quickly paring back gains. The unit bought $1.2990 but fell back to $1.2944 in Tokyo trade. The unit had in the past few days plunged to $1.2830, its weakest level since mid-September.

Market players “went for euro buying out of surprise” over the Noda comments, said Credit Agricole forex director Yuji Saito.

But the rally was short-lived, with investors realising Japan would use euros in its foreign reserves to buy the bonds, indicating there will not be large fresh buying of the single currency, Mr Saito said.

The €440 billion EFSF, set up last year to preserve financial stability in the eurozone in the wake of the Greece crisis, plans to issue this month bonds guaranteed by solvent eurozone members to raise bailout funds for Ireland.