Economy

BOJ increases bond buying; yields fall sharply


© Stocksak. FILEPHOTO: The exterior of Bank of Japan headquarters is pictured at Tokyo, Japan, on June 17, 2022. REUTERS/Kim Kyung-Hoon

Junko Fujita

TOKYO, Stocksak – In its latest effort to curb a recent spike in yields, the Bank of Japan stated that it would increase how many bonds it intends to buy in Wednesday’s day’s operations.

The market immediately reacted to this move. The 30-year JGB yield fell 10 basis points (bps), to 1.475%, its lowest level since Oct. 14.

The 20-year JGB yield dropped 6.5 bps points at 1.130%, its lowest point since Oct. 19.

Investors are testing the central bank’s resolve for low interest rates. This week, yields on super-long ends reached multi-year highs.

Last week, the BOJ carried out emergency bond buying operations in two consecutive sessions. Yields continued to rise.

The yields on shorter end notes also fell. The two-year JGB yield dropped 1 bps to 0.025%. The five year yield fell 2.5 bps, to 0.090%.

The benchmark 10-year JGBs did not trade and the yield remained at 0.250%. This is the upper limit of BOJ’s policy band. However, the bank continues to offer daily unlimited purchases of bonds of the same maturity.

The BOJ offered 350 billion yen ($2.36 trillion) to buy bonds with 10- and-25-year maturities. This was up from 250 billion.

The BOJ also announced that it would buy 575 billion Japanese yen bonds with 3- to 5-year maturities. This is an increase from the planned 475 billion and 150 billion yen bonds with maturities greater than 25 years. This is an increase from the 100 billion yen.

($1 = 148.1500 yen)

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