TOKYO, July 7 (Xinhua) -- The Bank of Japan said it would purchase an unlimited amount of Japanese government bonds (JGBs) on Friday in an emergency operation to check long-term yields pushed higher by the possibility of monetary tightening in the United States and Europe, among others.
The emergency bond buying operation saw the BOJ offer to buy an unlimited amount of 10-year JGBs at a yield of 0.110 percent.
The central bank here also increased the size of its regular auction-based purchase of five to 10-year maturities from the previous 450 billion yen (3.96 billion U.S. dollars) to 500 billion yen (4.40 billion U.S. dollars).
The aggressive move, which should curb domestic interest rates from being pushed higher, saw most JGB yields retreat and in doing so weakening the Japanese yen against a basket of other currencies.
The yen, following the bank's announcement, dropped to a nearly two-month low against the U.S. dollar.
The emergency bond buying operation was the first such operation since Feb. 3 and marks the third time the central bank has conducted unconditional buying at a specific yield since September, when it started its yield curve control policy.
The BOJ's procedure was as a result of leap a day earlier to 0.105 percent in 10-year JGBs, marking a five-month high and well above the central bank's target of zero percent under its yield curve control policy.
The yield started at 0.100 percent as markets here opened Friday, but retreated to 0.085 percent after the BOJ's emergency bond buying operation was announced.
The spike in yields was a result of market participants dumping debt ahead of expectations the U.S. Federal Reserve and the European Central Bank will exit from their own respective easing policies.
Furthermore, similar rises were seen in German, U.S. and European bond yields over the past almost two weeks, triggered by fears of general trend among global central banks to taper or cut their stimulus programs.
The European Central Bank, the Bank of England and the Bank of Canada, have all indicated in hawkish messages that reducing stimulus might soon be on the cards.
Adding to the reasoning of the BOJ, policy board meeting minutes from the European Central Bank, released Thursday, revealed it might be mulling doing away with its bond-buying pledge. The Fed's own minutes made similar suggestions of reining in its bond holdings in the near future.
The BOJ's aggressive monetary program includes regular purchases of a fixed amount of bonds from financial institutions to drive the yield on the 10-year bond to around zero percent.
Friday's fixed-rate buying operation was in a bid to force down interest rates by buying an unlimited amount of bonds from financial institutions at a set yield.
"The BOJ showed its strong determination to keep the 10-year yield around zero percent and not to let it rise above 0.10 percent," one market strategist was quoted as saying, following the BOJ's move.
