The Bank of Japan announced an unscheduled bond-purchase operation on Wednesday, reminding the market of its determination to slow the pace of increases in sovereign yields.
The operation had no immediate impact on the benchmark 10-year yield, which earlier in the day touched 0.815%, a fresh decade high. Japan’s sovereign debt has faced renewed pressure amid a selloff in US Treasuries, and as traders test the BOJ’s tolerance in the lead up to a monetary policy meeting on Oct. 30-31.
The central bank stepped into the debt market three times prior to Wednesday’s action with unscheduled operations after adjusting yield-curve control on July 28 to make the program more flexible. Some investors saw the July tweak as a move toward ending the negative interest rate policy as inflation remains above the BOJ’s 2% target.
The BOJ is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at this month’s meeting, according to people familiar with the matter.
Bond futures trimmed a drop slightly after the announcement. The 10-year yield remained at 0.81% after declining from 0.815% before the BOJ’s announcement. The yen stayed near psychological level of 150 per dollar, trading at 149.76.
--With assistance from Masaki Kondo.
