The actions taken by the Bank of Japan (BoJ) yesterday shows that the central bank remains committed to its experimental monetary policy of yield curve control and we at FxWirePro believe that it would continue that way as this tool could be the way out for the bank from its record monetary easing. As of now, the Bank of Japan (BoJ) has announced the target yield level for 10-year bonds around zero percent, which we suspect would be moved higher as inflation progress.

Yesterday, as the 10-year yield moved closer towards 0.1 percent mark, the BoJ offered to buy 200 billion yen bonds with remaining maturities of 10-25 years. This was an upgrade of 10 billion yen compared to the previous auction of 190 billion yen on December 9th. In addition to that, the central bank seems to be stressing on the higher end of the yield. It offered 120 billion yen worth of bonds with maturities of 25 years or more. This was again ¥10 billion upgrade from the previous auction.

In response, the yields on longer maturities bond declined and 10-year yield moved closer towards zero. The 10-year yield is currently trading at 0.06 percent and 30-year bond yield trading at 0.74 percent.