TOKYO Feb 10 The Bank of Japan increased its
buying in "superlong" bonds on Friday, helping to keep their
rising yields in check for now, though its policy to control the
JGB yield curve looks set to face more challenges, not least
The BOJ bought 320 billion yen of bonds with maturity of
more than 10 years to 40 years on Friday, 20 billion yen more
than its usual buying of 300 billion yen in those maturities.
It was only the second time the BOJ increased buying in that
sector since late September when the BOJ introduced the "yield
curve control" policy, in which it keeps the 10-year yield
around zero percent and actively tries to manage the yield
The 20-year yield dipped 1.0 basis point on the day to 0.670
percent, hitting its lowest level in more than a
week and off the one-year high of 0.730 percent hit last week.
The benchmark 10-year JGB yield was up 0.5 basis point at
0.085 percent, however, and other maturities were
The BOJ's move was largely a surprise and some market
players considered it unnecessary given that market sentiment
was already on the mend after Thursday's auction of 30-year
"It was a surprise. Perhaps the BOJ was worried that
Japanese bonds could falter after U.S. President Donald Trump's
talk of phenomenal tax cuts," said Koichi Sugisaki, vice
president of research at Morgan Stanley MUG Securities.
The BOJ has been doing damage-control since the unusual
approach it took its bond buying on Jan. 25 confused the market
as to its intentions.
By skipping widely anticipated buying in short-term bonds
that day, the BOJ reduced its bond buying in January to the
lowest level since October 2014, sparking speculation it may be
seeking to gradually taper off its bond purchasing.
The subsequent spike in JGB yields prompted the BOJ to step
up bond buying this week. It offered to take an unlimited amount
of 10-year JGBs at 0.110 percent on Monday, sending a strong
signal it will not tolerate the yield rising beyond that level.
But because the BOJ's policy statements have not clarified
where it think yields on other maturities should be, other
maturities could remain more volatile, market players say.
"I think the BOJ is still experimenting, including in
assessing where the appropriate levels for the yield curve are,"
said Takehiro Noguchi, senior economist at Mizuho Research
"I suspect the BOJ would not mind a rise in superlong bond
yields per se, but it doesn't like rapid rises," he added.
Further complicating the BOJ's work, comments from U.S.
Donald Trump late last month criticising Japan's currency policy
stance have raised suspicions that it may become more difficult
for the BOJ to take any easing measures in the future, or even
to stick to aggressive monetary stimulus.
With Japanese Prime Minister Shinzo Abe due to meet Trump
later on Friday and over the weekend, market players are nervous
that any signs Trump thinks the yen is too cheap against the
dollar could fan speculation over the BOJ's ability to act.
The 10-year JGB futures dipped 0.07 point to
149.91. The five-year JGB yield rose 0.5 basis point to minus
0.095 percent while the two-year yield dipped 0.5
percent to minus 0.215 percent.
($1 = 113.6900 yen)
(Reporting by Hideyuki Sano; Editing by Eric Meijer)