Bank of Japan strengthens yield target defense, offers to buy debt for four days By Reuters

© . FILE PHOTO: A man in a protective mask walks past Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo/File Photo By Junko Fujita TOKYO () -The Bank of Japan on Wednesday stepped up its efforts to defend its yield target by making a new offer to buy an unlimited amount of the 10-year bond for four consecutive sessions. The move comes as yields on the 10-year JGB remained at 0.25% all Wednesday, the upper bound of the target of about zero percent, despite the central bank’s offer to buy an unlimited number of 10 percent. year bonds at that rate. † “Given recent interest rate movements on longer-term bonds, we have announced a consecutive unlimited purchase of fixed-rate bonds to achieve our policy of bringing the 10-year yield around 0%,” the BOJ said in a statement. The surge in yields comes as the yen weakens sharply to a two-decade low against the US dollar amid a relentless widening of Japanese and US interest rate spreads, prompting markets to reconsider the commitment of the US dollar. central bank to test its super-easy yield curve checking policy. The benchmark climbed to its highest since late 2018 at 2.981% in Tokyo trading on Wednesday. “The Bank of Japan has no choice but to continue to offer unlimited purchases of JGBs,” said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan (NYSE:) Securities. “If the central bank allows 10-year bond yields to continue rising, its message to the market would become unclear.” The BOJ expects it to move the 10-year yield flexibly around the 0% target as long as it remains below the 0.25% cap. The BOJ accepted all 225.1 billion yen ($1.75 billion) in bids it received during Wednesday’s operation. The bank had also offered to buy unlimited amounts of 10-year bonds at 0.25% in February and made four consecutive days of offers in March. With the Japanese economy still weak and inflation subdued, the BOJ has emphasized its determination to keep policy ultra-easy even as the US Federal Reserve looks to aggressively raise interest rates to contain rising prices. BOJ governor Haruhiko Kuroda said on Monday that the yen’s recent moves have been “pretty sharp” and could hurt companies’ business plans, giving his strongest warning yet of the risks posed by the currency’s depreciation. . Treasury Secretary Shunichi Suzuki was more categorical on Tuesday, warning that the damage to the economy from a weakening yen right now outweighs the benefits. The yen plunged to nearly 130 per dollar on Wednesday — a level not seen in 20 years — raising the risk of direct intervention, which would see the central bank using its foreign exchange reserves to buy large amounts of yen in the open market. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis caused a sell off of the yen and rapid capital outflows from the region. ($1 = 128,6500 yen)

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