Japan's Government Bond Yields Hit 9-Year High... BOJ Purchases 300 Billion Yen in Bonds

10-Year Bond Yield Hits 0.605% Temporarily
Highest in 9 Years
Temporary Government Bond Purchase After 5 Months
"Aimed at Controlling Market Movements"

As the yield on Japan's 10-year government bonds surged, the Bank of Japan (BOJ) conducted an emergency bond purchase for the first time in over five months, Kyodo News reported on the 31st.

Bank of Japan (BOJ)

According to the report, the yield on the 10-year government bond briefly soared to 0.605% during the Tokyo financial market session, marking the highest level in about nine years since June 2014.

The sharp rise in the 10-year bond yield followed the BOJ's partial revision of its large-scale monetary easing policy at the Monetary Policy Meeting on the 28th.

At that time, the BOJ announced that it would maintain the fluctuation range of the 10-year bond yield at ±0.5% but would raise the threshold for conducting open market operations from 0.5% to 1%. Since 2016, the BOJ has implemented a yield curve control (YCC) policy by setting a target for the 10-year government bond yield, a long-term interest rate indicator, and purchasing bonds without limit if the yield exceeds the target to prevent further increases. Previously, the BOJ would immediately buy bonds to lower yields once they exceeded 0.5%, but going forward, it plans to tolerate rising yields up to 1% depending on market conditions.

As a result of the BOJ's policy revision, the 10-year bond yield surged sharply on the day, prompting the Japanese monetary authorities to intervene in the open market for the first time in five months. Kyodo News reported that the total bidding amount from financial institutions was 872.4 billion yen, of which the BOJ successfully purchased 300.2 billion yen in government bonds. This emergency bond purchase by the BOJ is the first since February 22, over five months ago.

However, the yen-dollar exchange rate remained around 141 yen, similar to the previous day, and there was no sign of yen appreciation.

The Nihon Keizai Shimbun explained, "With this policy revision, the effective upper limit on long-term interest rates has risen to 1%, causing bond yields to surge," adding, "The BOJ's emergency bond purchase is largely aimed at curbing market movements."