BOJ Is Handing Back the Japanese Bond Market to Investors

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(Bloomberg) -- The Bank of Japan is bringing an end to its near monopoly of control over the nation’s bond market.Most Read from BloombergSaudi Forces on...

-- The Bank of Japan is bringing an end to its near monopoly of control over the nation’s bond market.Japan’s central bank has tightly overseen the government debt market since it introduced yield-curve control in September 2016, with its ownership of outstanding bonds surpassing 50%. But with the authority now suggesting it’s ready to let the benchmark 10-year yield rise beyond 1%, investors look set to take back the helm.

Signs that the central bank may be moving away from yield-curve control can be seen in its decision to stop conducting unlimited bond-purchase operations every day, and also to no longer show yield levels at which the central bank buys. The operation was initially on an ad-hoc basis until it became daily last year.

The central bank’s presence still remains huge in Japan’s debt market in terms of bond purchases and an unconventional negative-rate policy. But the prospects for elevated inflation for a longer period is likely to fan speculation the BOJ will further normalize policy. Shakedown or smart business? Quebec restaurants balk at hefty penalty for using competitor's payment machines

 

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