BOJ Set to Buy More Benchmark Bonds to Assert Yield Control

(Bloomberg) -- The Bank of Japan set itself up to buy more bonds in the key 5-to-10 year maturities, showing an intent to maintain yield-curve control amid growing expectations of further debt-fueled stimulus from the government.

The central bank offered to buy 350 billion yen ($3.2 billion) of the tenor on Monday, the same as the previous regular operation. That’s even as it increased the number of days on which it will buy this debt in April to five, up from four in March. The benchmark 10-year yield fell 0.5 basis point after the operation to be at minus 0.01%.

Market participants were widely expecting the BOJ to reduce the buying amount on Monday, as it did for debt with shorter maturities earlier. The unexpected move comes amid reports that Japanese Prime Minister Shinzo Abe will declare a state of emergency within days as the coronavirus pandemic worsens in the nation.

“The BOJ continues to take action consistent with its policy of providing ample liquidity to markets.” said Mari Iwashita, chief market economist at Daiwa Securities Co. “With the talk of the government declaring an emergency, the BOJ showed its stance remains unchanged.”

Central banks globally are seeking to stabilize markets after concern surrounding the economic fallout of the virus outbreak turned investors jittery and led to wild swings across asset classes. The BOJ has boosted its asset purchases, conducted unscheduled bond purchases and repurchase operations to inject liquidity while refraining from cutting its negative interest rate further last month.

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