Speculations of Japan’s momentary policy changes push up the nation’s currency and yields, which in turn triggers its central bank’s unlimited bond buying offer on Monday.
The current policy of the Bank of Japan (BOJ) includes maintaining its short-term policy interest rate at negative levels, which has kept the 10-year yields near zero. Reports of possible tweaks in monetary easing measures to be made by the BOJ spurred a six basis point surge (sharpest increase in two years) in the Japanese 10-year government bond yields and pushed the yen to a two-week high against the U.S. dollar.
In an attempt to apparently stem the tide, the BOJ announced an offer to buy unlimited bonds on Monday. The 10-year yield slid following the announcement, but only to bounce back to just one basis point short of the day’s peak.
BOJ is scheduled to hold its next monetary policy meeting on July 30 and 31.