BOJ Set to Allow Long-Term Interest Rates to Rise Above 1% with Revision to JGB Yield Control Curve

Reuters file photo
The Bank of Japan headquarters in Tokyo

The Bank of Japan is likely to effectively let long-term interest rates rise above 1%, according to sources familiar with the central bank’s thinking during its two-day monetary policy meeting ending today.

The BOJ has kept the yield on benchmark 10-year Japanese government bonds at around zero percent, but at its July meeting, it decided to allow the yield to fluctuate in the range of plus or minus 0.5%. It also said it would cap the yield at 1% through fixed-rate purchase operations.

The forthcoming revision would be the first since July to raise the yield curve control that is part of the central bank’s monetary easing policy.

The unexpected rise in the U.S. long-term interest rates since August spurred the BOJ to discuss a policy revision. The central bank is hoping to alleviate negative impacts on financial markets.