(Bloomberg) -- The Bank of Japan added to its recent round of bond purchases in a bid to keep a lid on benchmark yields.
The central bank offered to buy an unlimited amount of 10-year government debt on Wednesday and Thursday, it said in a statement, extending its four-day operation that ended Tuesday. The new dates cover this week's two-day policy meeting.
The benchmark 10-year bond yield fell 1.5 basis points to 0.23% after the move was announced, but still remains close to the 0.25% ceiling of the BOJ's yield curve control policy. Tuesday's fixed-rate operation saw the BOJ purchase 921.5 billion yen ($7.2 billion) of 10-year debt, the most since July 2018.
“The BOJ probably extended the operation because the 10-year yield hasn't fallen and may rise above 0.25% in the coming days,” said Yurie Suzuki, a market analyst at Mizuho Securities Co. in Tokyo. “Given the BOJ is expected to leave policy unchanged this week, it's not a big surprise that the central bank has extended the 0.25% fixed-rate operation.”
The central bank's accommodative policy has widened the yield differentials between Japan and other developed economies, weighing on the yen and driving up import prices. Still, the BOJ is expected to leave policy unchanged this week, according to a Bloomberg survey of economists.
“The BOJ provided relief to the bond market with the announcement,” said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute in Tokyo. The extension of the fixed-rate operation “indicates that current monetary easing will remain in place,” he said.
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