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BOJ Resumes Bond Buying as 10-Year Yield Rises to Upper Limit

© Reuters.

(Bloomberg) — The Bank of Japan reiterated its strong commitment to ultra loose monetary policy with a fresh round of unscheduled bond purchases in a bid to cap a rise in yields.

The BOJ said it will buy an unlimited amount of 10-year government bonds at a fixed rate of 0.25% as the benchmark yield rose to that level — the upper end of its tolerated limit. It is the first such action this month after the bank conducted operations in the last week of March through a four-day long unlimited buying spree of government bonds amid a global debt rout. 

The selloff in bonds has since intensified with 10-year Treasury yields climbing toward 3% on Wednesday — to their highest since 2018.

“With the rise in super-long yields contained and the yen weakening, the BOJ took single action through unlimited buying, unlike in late March when it did a combination of purchases,” said Ataru Okumura, a strategist at SMBC Nikko Securities in Tokyo. “The operation was expected as it is the BOJ’s mandate under current scheme to buy bonds when the 10-year yield hits 0.25%.” 

BOJ Sees Off Bond Vigilantes and Makes Sure They Got the Message

While surging inflation in other parts of the world spurs policy makers to raise interest rates, the BOJ stands out with its commitment to loose policy to boost a moribund economy. Dogged by decades of minimal price appreciation, the central bank is much less willing to withdraw stimulus until it’s convinced a revival will become sustainable. 

The policy divergence has widened bond yield differentials between Japan and other big economies, helping push the yen to a 20-year low.

(Adds line on Treasury yields in third paragraph and chart.)

©2022 Bloomberg L.P.

BOJ Resumes Bond Buying as 10-Year Yield Rises to Upper Limit

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