BoJ Undertakes Additional Bond Purchases To Defend Yield Cap

bankofjapan jun20 14jun22 lt

The Bank of Japan conducted additional bond purchases on Tuesday as the policy tightening stance by major central banks put pressure on the 0.25 percent yield cap on Japanese government bonds.

"The Bank will make changes in the auction schedule and amounts of outright purchases of JGBs as needed, taking account of market conditions," the BoJ said in a statement.

The yen weakened to a 24-year low against the US dollar on Monday. The BoJ has been under renewed pressure to bring yields down, but such interventions weaken the currency.

Allowing the 10-year JGB yields to rise would probably give the yen a boost, at least in the short term, economists at Capital Economics said.

Economists suspect that the BoJ will raise the ceiling on long-term interest rates from 0.25 percent to 0.50 percent before long, buying itself a respite from the pressure on JGB yields and yen.

In a joint statement on Friday, the BoJ and the Ministry of Finance outlined their concerns about the weakness of the yen.

BoJ Governor Haruhiko Kuroda said on Monday that the recent deterioration in the yen is bad for the economy.

At the end of its monetary board meeting on June 17, the BoJ is widely expected to stick to its ultra loose monetary policy stance.

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