Fighting market forces, the BOJ will conduct a special operation to curb rising yields, according to Reuters

© Reuters FILE PHOTO: The exterior of the Bank of Japan headquarters is seen in Tokyo, Japan, June 17, 2022. REUTERS/Kim Kyung-hoon

By Kevin Buckland

TOKYO (Reuters) – The Bank of Japan said on Tuesday it would buy Japanese government bonds in a special operation, lowering the 10-year yield to a policy ceiling of 0.25% as the central bank grapples with a persistent rise in global rates.

The BOJ stands alone among developed markets in keeping short-term policy rates negative, in addition to setting zero long-term yields, rapid wage growth, relatively low consumer inflation and a weaker economic recovery than peers.

The BOJ will buy ¥100 billion ($692.28 million) worth of bonds with 10-25-year maturities and ¥150 billion with 5-10-year maturities.

The 10-year JGB yield was up 0.5 basis points by 0.25%, as of 0538 GMT, a level not seen since September 16. The central bank pegs the yield at +/- 25 basis points at zero under the control of the yield curve. Policy.

Japan’s bond market is putting pressure on global yields as major central banks, including the U.S. Federal Reserve and the European Central Bank, race to raise interest rates.

“The BOJ is trying to calm speculation that it might be forced to change policy,” said Masayuki Kichikawa, managing director of asset management at Sumitomo Mitsu (NYSE: ) in Tokyo.

“It makes it very clear that he has no intention of changing monetary policy for the foreseeable future.”

Refined markets

Japan’s central bank held steady last week despite widening policy divergence, sending the yen to a 24-year low. Japanese authorities intervened in the foreign exchange market for the first time since 1998 to recover the beaten currency.

The rise in prices has intensified in recent days, with UK gilt yields rising after investors took a harsher view of the new government’s fiscal plans.

In a sign of pressure on the market, the 10-year note was up 0.3% for nine years, according to Tradeweb Markets (NASDAQ:

Benchmark 10-year JGB futures earlier touched a three-month low of 147.62, down 0.29 points to 147.71.

Sumitomo Mitsui Kichikawa said: “The BOJ controls the 10-year yield, but other maturities are not controlled, so we’re seeing a skew, a kind of abnormal yield curve.”

Traders said the market was on edge ahead of the 40-year JGBs auction on September 15, after the 20-year bond sale had the weakest performance yet. However, market players said that the latest sale was completed smoothly.

Still, the 40-year JGB yield rose 8.5 basis points to 1.635%, the highest since 2015.

The yield on the 30-year JGB rose 6 bps to 1.435% for the first time since September 2015, and the 20-year yield rose 4 bps to 1.03% for the first time since December 2015.

The five-year yield rose 2 bps to 0.09%, a level not seen since September 2015.

The two-year yield rose 1 bp to a three-month high of -0.050%.

($1 = 144.4500 yen)

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