TOKYO, March 24 (Reuters) - Japan hit a new milestone in its experiment with negative interest rates after a leasing company issued commercial paper with a negative yield.
Sumitomo Mitsui Finance and Lease Co Ltd issued 5 billion yen ($44.27 million) of six-month commercial paper (CP) at a yield of -0.001 percent.
The company, an leasing arm of Sumitomo Mitsui Financial Group, will receive interest of 25,000 yen for the borrowing, a phenomenon that is made possible only after the Bank of Japan introduced negative interest rates in late January.
Banks are buying assets with negative yields, expecting they can sell them at a deeper negative rate to the Bank of Japan, which is gobbling up assets from government debt to corporate debt and stocks as part of its quantitative easing strategy.
In the BOJ's last CP buying operation last week, the BOJ bought commercial paper at as low as minus 0.385 percent.
The BOJ has committed itself to holding 2.2 trillion yen of commercial paper - short term borrowing instruments that are popular with companies - on its balance sheet as a part of its stimulus.
While CP rates could fall deeper into negative levels, some market players also said uncertainty persists because the BOJ provides limited information on which commercial paper it buys and it doesn't.
"It's not that the BOJ buys every issue. And only the BOJ knows what it will buy. So you could have a situation where you try to sell a certain CP to the BOJ and get rejected," said an official at a brokerage.
"I would say the outlook remains uncertain," he added.
($1 = 112.94 yen) (Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore)