The Bank of Japan is under pressure to revise policy again after investors repeatedly attacked the central bank’s new 0.5% cap for the 10-year government bond yield
is under pressure to revise policy again at its meeting ending Wednesday after investors repeatedly attacked the central bank’s new 0.5% cap for the 10-year government bond yield.
“There seem to be many investors, overseas in particular, who want to challenge the upper limit as long as the target range exists,” he said. Ending yield-curve control while providing ample funds to keep down bond yields “could probably calm the market more easily and thus prevent tightening of financial conditions,” he said.
However, the purchases create some anomalies in the bond market. The 0.5% yield on the 10-year bond, the only one explicitly targeted by the Bank of Japan, looks abnormally low relative to other yields, such as the 1.365% yield on the 20-year bond as of Tuesday. That in turn can disrupt corporate bond issuers who use government bond yields as a benchmark, officials and economists say.
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