The BOJ is offering a huge injection of liquidity as major bond yields hit 2-month highs

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  • BOJ offers to pump 2 trillion yen through temporary bond purchases
  • Benchmark 10-year JGB reaches 0.105%, the highest value since November 2021
  • Key return still within the loose range BOJ sets around the goal

TOKYO, Jan 6 (Reuters) – The Bank of Japan on Thursday offered to pump massive funds into the markets after long-term interest rates rose to a two-month high, signaling its determination to keep borrowing costs down for one support fragile economic recovery.

As part of the offer, the central bank announced that it would pump 2 trillion yen ($ 17.22 billion) into the markets from January 7-14 through temporary purchases of government bonds.

The announcement came after the benchmark 10-year Japanese Treasury (JGB) yield hit 0.105% on Thursday, marking its highest level since November 1 of last year and tracking a steady rise in US Treasury bond yields.

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While the BOJ has tools to contain further rate hikes, a sustained rise in US rates could challenge the central bank’s determination to defend its rate target.

As part of a policy known as YCC, the BOJ promises to steer short-term interest rates at -0.1% and 10-year JGB yields by 0% by aggressively printing money.

In a review of its monetary policy tools in March, the BOJ said it would move the 10-year yield up and down 0.25% around its 0% target. Continue reading

With inflation well below the BOJ’s 2% target, Governor Haruhiko Kuroda has repeatedly stressed the bank’s willingness to keep interest rates extremely low even if its big counterparts like the Federal Reserve withdraw from crisis-induced stimulus support and rate hikes.

($ 1 = 116.1700 yen)

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Reporting by Leika Kihara Editing by Chris Reese and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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