Yen-Dollar Exchange Rate Nears 150 Yen... Japanese Central Bank Announces Emergency Bond Purchases

10-Year Government Bond Yield Surpasses 0.25%
Bank of Japan Purchases Total of 250 Billion Yen in Government Bonds

[Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] The Bank of Japan (BOJ), Japan's central bank, announced an emergency bond purchase after the 10-year government bond yield exceeded the policy ceiling.

According to Bloomberg on the 20th, the BOJ stated that it would inject a total of 250 billion yen to additionally purchase government bonds ranging from 5-year bonds to 20-year long-term bonds. The 10-year government bond yield ceiling is set at 0.25%, and unlimited purchases will be made.

On this day, the 10-year government bond yield in the Japanese bond market surpassed the BOJ's ceiling of 0.25%, reaching 0.255% at one point during the session.

Bloomberg explained that the fact that the Japanese 10-year government bond yield exceeded the 0.25% level "shows how deeply rooted the market's expectation is that a shift in the Bank of Japan's Yield Curve Control (YCC) policy is inevitable."

Since introducing the negative interest rate policy in January 2016, the BOJ has implemented the YCC policy, purchasing government bonds without limit to keep the 10-year government bond yield within the target range (±0.25%) to prevent side effects caused by excessively falling bond yields. Within Japan, there are arguments that the policy should be maintained due to economic sluggishness, while others argue that the policy should be adjusted as inflation is intensifying due to negative interest rates.

In this regard, Ayako Sera, an investment strategist at Mitsui Sumitomo Trust Bank, said, "The Bank of Japan will not easily change the YCC policy," adding, "Therefore, it is expected that the 10-year government bond yield will not significantly exceed 0.25%, but situations where it surpasses this level will occur frequently."

Meanwhile, the yen exchange rate against the dollar rose to 149.960 yen, approaching 150 yen closely. The U.S. 10-year government bond yield reached 4.129% at one point during the session, the highest since 2009, which is analyzed to have put pressure on the yen's value decline.

Finance Minister Shunichi Suzuki attended the House of Councillors Budget Committee on the same day and emphasized, "I believe that the recent rapid and one-sided yen depreciation is undesirable," adding, "Excessive fluctuations caused by speculation are absolutely unacceptable."

This content was produced with the assistance of AI translation services.