By Junko Fujita
TOKYO (Reuters) -The Bank of Japan said on Friday it would conduct emergency bond buying operations for a second day, as the 20-year government bond yield rose to a new high in a further challenge to the central bank’s resolve to defend its easy policy stance.
In its latest move to curb elevated yields, the BOJ said it would conduct an emergency operations, offering to buy 100 billion yen ($665.56 million) of bonds with maturities between 10 and 25 years.
The BOJ conducted a similar operation on Thursday only to see yields on some notes rising to multi-year highs.
“Going forward, the Bank of Japan will have to repeat emergency operations to contain a sharp rise in yields on super-long JGBs,” said Ataru Okumura, strategist at SMBC Nikko Securities.
“But upward pressure on the 10-year bond yields is getting stronger, because not just super-long yields, but yields on shorter ended notes are rising.”
The central bank remains an outlier among a global wave of monetary policy tightening to combat soaring inflation, as it focuses on underpinning a fragile economy.
The divergence in policy and widening yield gap between the U.S. and Japanese economies have driven the yen’s sharp declines against the dollar this year, with the yen tumbling to a fresh 32-year low beyond 150 yen to the dollar on Thursday.
U.S. benchmark 10-year Treasury yield hit fresh 14-year peaks on Thursday.
After the BOJ’s announcement, the yields on 20-year bonds rose to 1. 170%, its highest since August 2015, after the announcement.
Yields on the benchmark 10-year yields are at 0.25% at the top of the ceiling of BOJ’s policy band, having breached that level for two straight sessions this week.
Yields on nine-year bonds, which are outside the BOJ’s target window, have risen to 0.321% in early trade..
Under its yield-curve control policy, the BOJ pledges to cap the 10-year JGB yield around 0% to keep borrowing costs low and stimulate the economy.
The central bank also increased the amounts of bonds it would buy at its planned operations, offering to buy 500 billion yen of bonds with one- to three-year maturity, and 575 billion yen of bonds with 3- to 5-year maturity.
Additionally, the bank would offer to buy 650 billion yen of 5- to 10-year bonds, up from planned 550 billion yen.
($1 = 150.2000 yen)
(Reporting by Junko Fujita; Editing by Christian Schmollinger & Shri Navaratnam)
