The Bank of Japan on Monday offered to buy a smaller amount of Japanese government bonds in a regular operation, sending yields higher in a move that some market participants saw as the central bank's latest effort to counter yen weakness.

The BOJ trimmed the purchase amount of bonds with five to 10 years left to maturity to 425 billion yen ($2.7 billion) from the previous 475 billion yen on April 24. The benchmark yield on the 10-year Japanese government bond subsequently rose to a six-month high of 0.935 percent at one point.

The reduction was the first since the BOJ ended in March its negative interest rate policy and yield cap program, both key pillars of its unorthodox monetary easing that has been in place for the past decade or so.

Bond yields move inversely to prices.

BOJ chief Kazuo Ueda has said recently that bond yields should be determined more by market forces. Despite the March policy change, the BOJ has vowed to keep buying about 6 trillion yen worth of bonds a month to prevent a surge in yields that would negatively affect the economy and its resolve to achieve stable inflation.

But keeping bond yields low has made the yen less appealing than higher-yielding currencies like the U.S. dollar following aggressive interest rate hikes by the Federal Reserve.

The resulting interest rate differential has been a major factor behind the yen's sharp fall against the dollar, which has raised concerns about a negative impact on the economy.

Financial markets are looking for hints as to the timing of the next interest rate hike by the BOJ and changes in its bond buying plans.

The central bank maintained policy unchanged at its meeting in April by setting short-term interest rates in a range of zero and 0.1 percent, but some of its board members mentioned the need to reduce bond buying.

==Kyodo

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