REPEAT: MNI: BOJ: JGB Ops Aimed At Keeping 10-Yr Yld Around 0%

     TOKYO (MNI) - The Bank of Japan's decision Friday to accelerate the pace of

its Japanese government bond purchases and conduct a fixed-rate JGB buying

operation is aimed at keeping the10-year bond yield around zero percent, its key

policy target, a BOJ official told MNI.

     The BOJ took action to prevent the recent sharp rise in long-term bond

yields from distorting the nearly flat yield curve, an official at the bank's

Financial Markets Department said.

     "Today's action is aimed at keeping the 10-year bond yield at around zero

percent in response to the recent sharp rise in long-term interest rates," he

said.

     Separately, a person who is familiar with BOJ thinking said the BOJ could

not leave the recent rise in long-term interest alone and that it needed to show

its stance of fighting the uptrend in JGB yields.

     The BOJ's daily bond market operations do not indicate any future monetary

policy changes and the pace of its bond purchases fluctuates in tandem with bond

market conditions, he said.

     Under the yield curve control framework, the BOJ is seeking to stabilize

the 10-year government bond yield, the benchmark for long-term borrowing costs,

at around zero percent and keep the overnight interest rate at -0.1%.

     Upward pressure on JGB yields has increased in recent trading in line with

higher U.S. Treasury bond yields.

     The 10-year bond yield rose to 0.095% in early Friday morning trading after

the U.S. Treasury 10-year yield climbed to a four-year high of 2.786% Thursday.

Later at midday, the 10-year JGB yield stood lower at 0.085%, following the

BOJ's action.

     The U.S. 10-year bond yield at 2.75% is widely regarded as a long-term

equilibrium rate.

     On Friday, the BOJ announced to buy 10-year JGBs at a fixed rate of 0.110%

and raised the scale of its purchase of JGBs with a remaining life of 5 to 10

year, in a widely expected move to head off a further rise in bond yields.

     The BOJ's fixed-rate bond buying operation is the first since July 7, 2017,

when it conducted a similar operation, also at 0.110%.

     The BOJ didn't buy 10-year bonds through the fixed-rate operation as

investors didn't want to incur losses through sales of bonds to the BOJ.

     BOJ officials see that the recent rise in JGB yields has been mainly

influenced by higher U.S. Treasury bond yields and they don't see any domestic

factors to push up JGB yields.

     However, they judged that the BOJ needed to take action to keep higher JGB

yields from distorting the yield curve that is designed to help the bank achieve

its 2% inflation target.

     The scale of JGB purchases with a remaining life of 10 to 25 years and more

than 25 years was left at Y190 billion and Y80 billion, unchanged from the

previous similar operations on Wednesday.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com