By Leika Kihara

TOKYO, Reuters – Japanese policymakers had to reassure the markets Tuesday that the Bank of Japan was not required to bankroll the public debt. Former premier Shinzo Abe called the central bank a “subsidiary government” which can finance its spending indefinitely.

Shunichi Suzuki, the Finance Minister, stated that the government didn’t believe it was okay for the BOJ to buy government debt and continue rolling over the same indefinitely.

Suzuki stated that Japan must not lose trust in its finances and markets.

Hirokazu Matsuno Chief Cabinet Secretary also said to reporters that it was up to the government not only set monetary policy but must obey the BOJ’s rules.

These remarks were made after Abe, who was quoted by local media Monday as saying that rolling over government debts sold to central banks was fine “because the BOJ (the government’s subsidiary)”

Opinions from Abe who has a lot of influence within political circles drew criticism from lawmakers because it was an indicator that the BOJ’s extremely loose policy was allowing Japan to spend hugely despite its ballooning debt.

The move also raised concern about Japan’s approach to debt monetisation. This is prohibited lawfully and involves the central bank underwriting government borrowing.

Although the BOJ buys large amounts of debt already, they do so through the markets rather than buying directly from the government.

In order to not give the impression the central bank is near monetising the debt, it had resisted buying bonds from the market during the time the finance ministry conducted its debt auctions.

The BOJ ended this practice Tuesday when it continued its offer to purchase unlimited amounts of 10-year government bonds.

It follows an increase in central bank commitments last month to maintain ultra-low interest rates by vowing that it will buy unlimited quantities of bonds each day.

Recently, the BOJ has been criticized for their prolonged stimulus program that fueled a unwelcome fall in the yen. Instead of focusing attention on Japan’s extremely low interest rates and growing rates for major economies, investors are concentrating on the increasing gap between them.

Some analysts believe that the BOJ could be forced into keeping rates ultra low for a longer time to preserve debt financing costs.

Due to years of massive fiscal spending, Japan has a public debt twice as large as its economy.