BOJ to Carry Out Operations to Reduce Government Bond Yields

On Oct 24, the Bank of Japan announced an unscheduled bond operation to slow the rise in Japanese government bond (JGB) yields, which had reached new decade highs. From Wednesday, Japan's central bank offered to buy 300 billion yen ($2.00 billion) in bonds with maturities of five to ten years and 100 billion yen in bonds with maturities of ten to twenty-five years.

This was in addition to its daily offer to purchase an unlimited number of JGBs at a fixed rate of 1%. Following the BOJ announcement, the 10-year JGB yield fell 0.5 basis point to 0.855 percent, after trading unchanged from Oct 23rd close of 0.86 percent, the highest since July 2013.

The rise in US Treasury yields has pushed Japanese yields higher, with the benchmark 10-year note topping 5% overnight to reach a 16-year high. Following a surprise policy change at the end of July, the BOJ capped the 10-year yield at 1% under its yield curve controls (YCC). Although the yield remains far below that level, policymakers have intervened on numerous occasions to slow the rate of increase.

The next policy decision will be made by the Fed on October 31.