Bank of Japan boosts bond interventions

The Bank of Japan announced a further set of buying operations today (June 14) after yields came under continued upward pressure. 

In a set of previously unscheduled purchases, the central bank said it will offer to buy longer-dated debt, after the 30-year yield hit 1.28%.

On June 15, the BoJ will offer to buy ¥150 billion of bonds ($1.1 billion) with more than 25-year maturities. The central bank will also offer to buy ¥250 billion of 10–25 year Japanese government bonds. 

The central bank increased previously scheduled purchases of bonds with lower maturities. For 5–10 year debt purchases, it said it will buy ¥800 billion. This is a step up from the initial plan to buy ¥500 billion, launched after the 10-year yield remained at 0.255%. The upper end of the BoJ’s tolerance band is 0.25%. 

The central bank said it will also buy ¥625 billion each of 1–3 year and 3–5 year bond maturities, ¥150 billion more than initially planned for each. 

BoJ governor Haruhiko Kuroda has insisted that it is still too early to tighten monetary policy for the economy still recovering from the pandemic. Critics slammed the governor for comments last week that the Japanese population has become more “tolerant” of inflation. The next day, Kuroda apologised. 

Some observers say that the BoJ is likely to be able to keep yields low for 10-year yields, but there is uncertainty around whether this can be achieved for longer maturities. 

After today’s announcement, longer-dated yields fell, but the benchmark bond continued trading marginally above its upper limit of 0.25%.

Central bank data showed that the BoJ bought a record amount of ¥2.2 trillion of bonds on June 14 through its fixed-rate operation. This surpassed the previous high in 2018, Bloomberg reported.