The Bank of Japan is snapping up the equivalent of more than $750 billion worth of government debt a year in an effort to spur inflation and growth. At that rate, analysts say, banks could run out of government debt to sell within the next 18 months.

The looming scarcity is a powerful sign of the limits central banks face as they turn to ever-more aggressive means of stimulating their economies. The problem is mirrored in Europe, where self-imposed rules limit how many eurozone government bonds the European Central Bank can buy from individual governments. Facing a diminishing supply of sovereign bonds, the ECB started buying corporate debt in June. Some economists have even called for the ECB to start buying stocks. The central bank left its bond-buying program and interest-rate policy unchanged at its meeting Thursday.


Its most obvious alternatives--pushing rates deeper into negative territory or buying other types of assets--have practical limitations. Meanwhile, the BOJ's economic goals remain out of reach: Inflation is stubbornly low, and the yen has strengthened about 18% this year.


Following the ECB's move into corporate debt would be tricky, as that market is relatively small in Japan.

The central bank has also recently been buying exchange-traded funds as another way to inject money into the economy. It now owns nearly 60% of assets managed by such funds in Japan, says Morningstar Inc., a level of ownership critics say is already distorting the market.

Any sign that the BOJ is hitting limits on government debt purchases would remove an important prop for the market. Japanese government bonds have rallied this year, largely because investors have been confident that the central bank will be a consistent buyer.

Indications that the BOJ may already be reducing its purchases of longer-dated JGBs pushed the yield on 10-year debt within a whisker of positive territory recently after nearly six months of negative yields. Investors caught off guard by the BOJ's signals started selling, sending yields higher. Bond yields rise as their prices fall.

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