MNI INSIGHT: Current 10Y JGB Yield Within BOJ Acceptable Range

--BOJ Ready With Flexible Bond Buying Ops To Curb Rapid 10-Year Yield Rise

     TOKYO (MNI) - The higher Japanese government bond yields seen on the back

of rising U.S. Treasury bond yields are still within the Bank of Japan's

acceptable range and the BOJ's primary focus remains how -- and how rapidly --

the 10-year bond yield moves toward +0.2% or higher, MNI understands.

     The 10-year JGB yield rose to 0.155% in early afternoon trade on Thursday,

up two basis points from Wednesday's close to the highest level since January

2016.

     BOJ officials in charge of daily operations are required to trade the

10-year bond yield "around zero percent" with a range of -0.2% to +0.2% that the

BOJ board has decided and the central bank stands ready to curb higher yields

through its outright bond buying operations 'flexibly and appropriately', if the

rise in 10-year bond yield is deemed too rapid.

     Compared with the recent rapid rise in the U.S. 10-year Treasury yield, the

pace of JGB yield gains hasn't been so fast as to unnerve the views of officials

in charge of operations who still have a wait-and-see outlook.

     The 10-year bond yield at 0.155% is still within the BOJ's tolerated -0.2%

to +0.2% range and BOJ officials are focused on how and at what speed the

10-year bond yield moves toward +0.2% or higher.

     --FLEXIBLE TARGET

     BOJ officials hope JGB yields move 'flexibly' taking note of both economic

and price condition developments, as well as reflecting overseas bond markets.

     At the July policy meeting, the BOJ board voted 7-2 to add flexibility its

long-term interest rate target and asset purchases, allowing the nearly flat

Japanese government bond yield to steepen slightly in line with firmer growth

and inflation.

     The bank "strengthened" its framework, allowing a wider trading range of

+0.2% to -0.2% for the 10-year JGB yield, double the previous, unofficial range

of +0.1% to -0.1%.

     The 20-year JGB yield rose to 0.695% Thursday, hitting the highest level

since March, while the 30-year bond yield rose to 0.953% to the highest level

since February 2016. The 40-year bond yield rose to 1.115%, also the highest

level since February 2016.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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