BoJ mulls ending yield control to focus on bond buying

Tokyo: The Bank of Japan (BoJ) is considering scrapping its yield curve control programme and instead indicating in advance the amount of government bonds it plans to purchase, Jiji Press reports without saying where it got the information.

The central bank will stop its programme to guide benchmark 10-year government bond yields to around 0%, as part of its efforts to normalise monetary policy, according to Jiji. The bank will decide on that and ending negative interest rates as soon as the next policy meeting concluding on March 19, the report said.

Expectations are growing that the BoJ will raise interest rates for the first time since 2007 as soon as this month, as higher wages and steady inflation boost the case for the policy move.

Speculation that a BoJ rate increase is imminent weighed on bonds, with the benchmark 10-year yield rising two basis points this week to 0.73%, while the yen strengthened 2.1% during the period to 147.06 per US dollar, marking the biggest weekly gain this year.

Volatile overnight indexed swaps had the odds of a BoJ rate hike by March 19 at about 67% as last Friday, compared with around 26% at the end of February, Bloomberg-compiled data show.

BoJ officials have also recently increasingly been indicating that the rate move is nearing. — Bloomberg