Japanese government bond yields remained above the central bank's 0.5% policy ceiling on Wednesday, after the Bank of Japan unanimously decided to keep its yield curve controls in place.
Anticipation had been building for Bank of Japan Governor Haruhiko Kuroda and his colleagues to make a change at Wednesday's meeting, with expectations ranging from further tweaks to yield curve control to a full abandonment.
The benchmark yield was up 1 basis point at 0.51% as of 0250 GMT. In a relatively volatile session for cash bonds, the yield had started out flat and then eased as much as 1.5 basis points at one point to 0.485%. "If they had expanded the band again or terminated YCC, yields would rise, which would be a de facto rate hike," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.Although it has been only a month since the BOJ shocked markets by doubling the allowable band for the 10-year JGB yield to 50 basis points either side of the 0% policy rate - ostensibly to improve market function - the change emboldened speculators to test the bank's resolve.
The 10-year yield has repeatedly breached the BOJ's ceiling, only to close back at the 0.5% limit on each day. On Friday, it spiked to a 7-1/2-year peak of 0.54%. Ten-year JGB futures were in the midday break at the time of the policy decision. They were last up 0.19 point at 145.03. They had dipped as low as 144.15 on Friday for the first time since March 2014.Reporting by Kevin Buckland; Additional reporting by Ankur Banerjee and Rae Wee; Editing by Bradley Perrett, Sam Holmes and Edmund Klamann
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