Investors have renewed their attack on the BOJ's ultra-loose interest rate stance, expecting the central bank to abolish its yield curve control (YCC) policy after incoming governor Kazuo Ueda takes the helm in April.
Ueda will testify before Japan's lower house on Friday.
The yield on 10-year JGBs climbed to 0.505% on Wednesday, breaking through the central bank's 0.5% cap and marking its highest level since Jan. 18.
The BOJ said it would buy 300 billion yen ($2.2 billion) of Japanese government bonds with maturities of five to 10 years and 100 billion yen of bonds with maturities of 10 to 25 years.
Masayuki Koguchi, general manager of Mitsubishi UFJ Kokusai Asset Management's fixed income division, said he expects the BOJ to conduct emergency operations when yields rise at least until the next policy meeting in March.
"But it is questionable whether that is effective," he added.
Foreign investors have been particularly active in attacks on the BOJ's policy. They sold a monthly record of more than 4 trillion yen in JGBs in January, data from the Japan Securities Dealers Association showed.
In order to deter speculation, the BOJ last week quadrupled the minimum fee charged to financial institutions for borrowing some 10-year Japanese government bond notes, effective from Feb. 27.
The five-year JGB yield rose to 0.245% on Wednesday, its highest since Jan. 18, exceeding a level that has prompted the BOJ to conduct loan operations.
The BOJ has provided loans maturing in five years to financial institutions three times since last month after amending rules for its funds-supply operation.
($1 = 134.6800 yen)
(Reporting by Junko Fujita; Editing by Muralikumar Anantharaman and Edwina Gibbs)
By Junko Fujita
