10-year JGB yield reaches 0.5%
This increase will put pressure on the BOJ
Earlier the BOJ raised the yield target limit from 0.25% to 0.5%
The latest rise in 10-year Japanese government bond (JGB) yields is set to give the Bank of Japan (BOJ) a headache.
The yield on the 10-year JGB rose to 0.50% for the first time since July 2015, hitting the yield target limit allowed by the BOJ.
A sustained rise above that level risks leading to speculation that the central bank will raise the yield ceiling further or abandon its negative interest rate policy.
The increase came after Japan's Finance Ministry on Thursday raised the coupon rate on the 10-year JGB to 0.5% from 0.2% previously, the highest level since December 2014.
On Friday, the central bank bought an additional ¥300 billion ($2.2 billion) of 5- to 10-year bonds on top of scheduled purchases of ¥1.23 trillion for *tenors of five years or less and ¥300 billion of 10- to 25-year bonds.
*period of time remaining before the financial contract expires.
In addition, the BOJ also offered two-year interest-free loans totaling ¥2 trillion for the third day.
Since the funds borrowed from such operations are often used to buy government debt, they are seen as a tool to maintain short-term yields.
