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TOKYO — The Bank of Japan has begun loosening its long-lived tight control over the nation’s bond market, gradually allowing the private-sector to determine prices. But the issuance of government bonds will not subside, creating the risk of an unexpected increase in interest rates during this transition.
Just after the BOJ recast its short- and long-term interest rate operations known as yield curve control on Thursday, there was an auction for 10-year Japanese government bonds, the yield on which serves as a benchmark for long-term interest rates. The results were a safe start, with the highest bid yield of 0.915%, in line with market expectations.
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