BOJ Is Said to Seek More Yield Fluctuations in Bond Market

Bank of Japan officials are looking at ways to enable bond yields to move around more as they try to improve the functioning of a bond market dominated by the central bank, according to people familiar with the matter.

With a review of policy looming next week, some of the officials want to generate more fluctuations in yields while sticking with the current movement range of around 20 basis points either side of the BOJ’s zero target on 10-year government debt, the people said.

That’s an indication officials see tweaks as aimed at encouraging more moves rather than allowing yields to go higher.

Disclosing fewer specifics of bond-buying operations ahead of time would be one option for facilitating more moves, according to the people.

BOJ Is Said to Seek More Yield Fluctuations in Bond Market

The range around the 10-year yield target is a key focus for markets as the central bank looks to enhance the sustainability of its monetary stimulus. The BOJ is looking to shore up its yield curve and asset buying framework to cope with a longer period of expected use to reach its distant price target.

The bank is set to announce the results of the review on March 19.

While officials think more yield movements would help lift the relatively low volatility of Japan’s bond market, no conclusions have been reached on how to achieve this before the end of the review, according to the people. Whether the movement range should be widened will still be a topic of discussion at the meeting, they added.

The yen was trading at 108.56 against the dollar Thursday morning after strengthening as much as 0.4% after Bloomberg published an earlier version of this report late Wednesday. Japan’s 10-year JGB futures were trading at 151.06 after falling as low as 150.90 yen Wednesday night.

Governor Haruhiko Kuroda appeared to rule out a widening of the range during comments in parliament on Friday that caused yields to tumble. His deputy, Masayoshi Amamiya, seemed to walk back those comments on Monday by saying yields could fluctuate more as long as that didn’t impair the effect of monetary easing, sending yields up again.

Officials say the governor and deputy are on the same page when it comes to bond yields, adding that Amamiya was speaking in general terms, the people said.

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