Another surprise move from the Bank of Japan

The Bank of Japan announced an unplanned bond-buying operation. The bank had also made changes to its yield curve control program on Tuesday. The Bank of Japan (BOJ) continues to make moves on the bond side that markets did not expect. The bank, which took steps regarding the yield curve on Tuesday, has now announced a previously unplanned bond-buying operation. The Bank of Japan (BOJ) announced a bond-buying operation that it had not previously announced as benchmark yields climbed towards the central bank’s upper limit. The BOJ offered to buy 100 billion yen in 3- and 5-year bonds and 100 billion yen in 5- and 10-year bonds. The 10-year yield rose 5.5 basis points to 0.450 percent, approaching the 0.5 percent upper limit set by Tuesday’s policy decision. BOJ Governor Haruhiko Kuroda made a surprise decision on Tuesday to make changes to the bank’s yield curve control program. According to the decision, the BOJ will now allow 10-year Japanese bond yields to rise to around 0.5 percent instead of 0.25 percent. This paved the way for the 10-year bond yield to trade within a wider band. The bank said in a written statement that the decision would increase the sustainability of the monetary easing policy. Kuroda said that there was no need for a further widening of the yield band and that this move did not mean an interest rate hike. All 47 economists who participated in the Bloomberg survey predicted that there would be no change in policy, but expressed the view that the bank should do more to improve the functionality of the bond market. The BOJ’s steadfast adherence to the 10-year yield cap to date has indirectly served as an anchor that has helped keep borrowing costs low worldwide. While financial markets were buoyant following the decision, the BOJ began to make unlimited bond purchases of almost all maturities.