{"id":126299,"date":"2022-03-28T08:25:12","date_gmt":"2022-03-28T08:25:12","guid":{"rendered":"https:\/\/fin2me.com\/?p=126299"},"modified":"2022-03-28T08:25:12","modified_gmt":"2022-03-28T08:25:12","slug":"boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits\/","title":{"rendered":"BOJ makes rare 2nd offer to buy unlimited bonds as yields test policy limits"},"content":{"rendered":"

TOKYO (Reuters) -The Bank of Japan desperately defended its yield target on Monday by making two offers in a single day to buy an unlimited amount of government bonds, as it struggled to swim against the global tide toward higher interest rates.<\/p>

FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020. REUTERS\/Kim Kyung-Hoon<\/figcaption>

The central bank\u2019s efforts to defend its ultra-loose policy pushed the yen to a six-year low of 123.25 to the dollar on Monday, pinching Japan\u2019s economy by inflating already surging fuel and raw material imports.<\/p>\n

\u201cThe power of the BOJ\u2019s unlimited bond-buy offer is clearly waning,\u201d said Takahide Kiuchi, a former central bank board member who is now an economist at Nomura Research Institute.<\/p>\n

\u201cMarkets may more forcefully test the BOJ\u2019s resolve to defend the 0.25% ceiling, which may prompt the bank to modify its approach and allow the 10-year yield to rise more.\u201d<\/p>\n

The yield on the benchmark 10-year Japanese government bond (JGB) hit a fresh six-year high of 0.250% on Monday, even after the BOJ stepped into the market with an offer to buy unlimited amount of JGBs to defend the implicit 0.25% cap set around its yield target.<\/p>\n

After the morning offer failed to push down yields, the BOJ made a second offer in the afternoon to buy unlimited amounts of JGBs with maturities of more than five years and up to 10 years.<\/p>\n

While the first offer drew no bids, the BOJ accepted bids to buy 64.5 billion yen ($524 million) in JGBs in the second offer.<\/p>\n

The two offers, which were the first since Feb. 10, underscored the BOJ\u2019s resolve to keep rates ultra-low in contrast to the Federal Reserve\u2019s aggressive rate hike plans.<\/p>\n

\u201cMarkets are putting the BOJ to test, so the central bank has no choice but to keep offering unlimited bond buying,\u201d said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan Securities.<\/p>\n

\u201cIf yields are allowed to move above 0.25%, investors will think the BOJ has tolerated a rise above that level. That makes it harder for the BOJ to carry on with yield curve control.\u201d<\/p>\n

Under yield curve control (YCC), the BOJ pledges to guide the 10-year JGB yield around 0% as part of efforts to stimulate the economy by keeping borrowing costs low.<\/p>\n

The 10-year JGB yield has been creeping up in tandem with a rise in U.S. long-term interest rates, as investors have priced in the prospect of aggressive rate hikes by the Federal Reserve.<\/p>\n

Markets had been focusing on when the BOJ could step in to defend the 0.25% ceiling, after refraining to do so on Friday as the 10-year yield topped the level at which the central bank had offered to buy an unlimited amount in February.<\/p>\n

The BOJ\u2019s current guidance is that it will allow the 10-year yield to move flexibly around its 0% target as long as it stays below the 0.25% upper limit, though it will take into account not just the level but the speed of any rise in yields.<\/p>\n

BOJ Governor Haruhiko Kuroda has repeatedly said the central bank would maintain interest rates at the current ultra-low levels, given the fragile economic recovery and as inflation remains well below its 2% target.<\/p>\n

Growing complaints from politicians over the weak yen, which is inflating Japan\u2019s already rising import costs, may complicate the BOJ\u2019s efforts to keep yields ultra-low, analysts say.<\/p>\n

The dollar climbed roughly 0.95% to 123.25 yen on Monday, its highest since December 2015. It rallied over 7% so far in March, its biggest monthly gain in over five years.<\/p>\n

The BOJ is caught in a dilemma. By capping rates at zero, it is fueling yen declines that may hurt the economy by pushing up the cost of living for households and companies.<\/p>\n

\u201cMaking offers for unlimited bond buying too frequently may cast doubt over the feasibility of yield curve control,\u201d said Shotaro Kugo, an economist at Daiwa Institute of Research.<\/p>\n

\u201cIt may also draw unwanted public attention over the weak yen, so the BOJ probably wants to avoid stepping in too often.\u201d<\/p>\n

($1 = 123.1200 yen)<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

TOKYO (Reuters) -The Bank of Japan desperately defended its yield target on Monday by making two offers in a single day to buy an unlimited […]<\/p>\n","protected":false},"author":3,"featured_media":126298,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\nBOJ makes rare 2nd offer to buy unlimited bonds as yields test policy limits - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BOJ makes rare 2nd offer to buy unlimited bonds as yields test policy limits - Fin2me\" \/>\n<meta property=\"og:description\" content=\"TOKYO (Reuters) -The Bank of Japan desperately defended its yield target on Monday by making two offers in a single day to buy an unlimited [...]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fin2me.com\/business\/boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits\/\" \/>\n<meta property=\"og:site_name\" content=\"Fin2me\" \/>\n<meta property=\"article:published_time\" content=\"2022-03-28T08:25:12+00:00\" \/>\n<meta name=\"author\" content=\"Mark\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/fin2me.com\/wp-content\/uploads\/2022\/03\/BOJ-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Mark\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fin2me.com\/business\/boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits\/\",\"url\":\"https:\/\/fin2me.com\/business\/boj-makes-rare-2nd-offer-to-buy-unlimited-bonds-as-yields-test-policy-limits\/\",\"name\":\"BOJ makes rare 2nd offer to buy unlimited bonds as yields test policy limits - 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