BOJ Keeps Cap for 10-Year Government Bond Yield, But Calls for More Flexibility

By Megumi Fujikawa

TOKYO--The Bank of Japan on Tuesday kept its 1% cap on the yield of 10-year Japanese government bonds, but eased its language, calling the cap a reference point rather than a hard upper limit.

The BOJ in July raised the cap to 1% from 0.5%. The latest statement Tuesday didn't specify any hard cap above the 1% reference line. The central bank kept short-term interest rates unchanged at minus 0.1%.

After U.S. Treasury yields rose sharply in recent weeks due to stronger-than-expected economic data, the benchmark JGB yield was also moving closer to the central bank's 1% cap. The 10-year JGB yield hit 0.955% Tuesday morning, its highest level since May 2013.

In its quarterly outlook, the bank's policy board raised its forecast for core consumer inflation, excluding fresh food for the current fiscal year ending March 2024 to 2.8% from the 2.5% projection made in July. The board expects core consumer prices to rise 2.8% in the next fiscal year, up from the previous forecast of 1.9%.

The yen fell slightly on the BOJ's decision, which didn't include a new higher JGB yield target as some had forecast.

Write to Megumi Fujikawa at [e-mail]

(END) Dow Jones Newswires

10-31-23 0009ET