The Japanese yen heartened and 10-year JGB yield rose after the Bank of Japan said it would allow “greater flexibility” in its target kitchen range for 10-year Japanese government bond yields.
Yields for 10-year Japanese government bonds stood at 0.551% on the communiqu, the level since September 2014. The yen was trading at 138.64 against the dollar at 12:35p.m. Hong Kong and Singapore in good time dawdle.
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After a two-day policy meeting, the BOJ adjusted its stance on its yield curve hold back policy, saying it will continue to allow 10-year government bond yields to fluctuate in the range of around supplementary and minus 0.5%.
The central bank also offered to buy 10-year JGBs at 1% every business day through fixed-rate affairs, unless no bids are submitted. The move effectively expands its tolerance by another 50 basis points.
A Nikkei revealed earlier said the BOJ will let long-term interest rates rise beyond its cap of 0.5% “by a certain degree” at its monetary programme meeting today.
Under its yield curve control protocol, the central bank targets short-term interest rates at -0.1% and the 10-year government bond yield at 0.5% chiefly or below zero.
Japan’s core consumer price index climbed 3.3% year-on-year in June, slightly aged than the 3.2% recorded in May.
With inflation having exceeded the BOJ’s 2% target, concerns are rising that Japan’s more low interest rates have made the yen less attractive and vulnerable to selling.
Central banks around the world arrange raised rates aggressively to rein in on inflation, but Japan has continued to maintain an ultra-loose monetary policy and kept appraises low.
On Friday, the Tokyo’s core consumer price index, which excludes volatile fresh food but includes tinder costs, rose 3.0% in July from a year ago. That’s slightly more than the 2.9% expected in a Reuters consensus vote.
— CNBC’s Lim Hui Jie contributed to this report.