Bank of Japan makes shock change to bond yield policy

The Bank of Japan on Friday maintained negative interest rates but said it would now allow “greater flexibility” in its target range for 10-year government bond yields.

The country's strict yield curve control policy would now allow movements of around plus and minus 0.5% without “rigid limits,” the central bank said.

It also offered to buy 10-year bonds at 1% every business day through fixed-rate operations, expanding its tolerance by another 50 basis points. Yields for the bonds stood at 0.539%, their highest level since September 2014.

The BOJ said it will “conduct yield curve control with greater flexibility, regarding the upper and lower bounds the range as references, not as rigid limits, in its market operations”.