Bank of Japan cuts JGBs purchases, hints at tighter policy

Bank of Japan (BOJ) has sent a hawkish signal to markets on Monday by reducing the amount of Japanese government bonds (JGBs) it purchased in a regular operation, the NIKKEI Asia reported.

This move suggests the Japanese central bank may be considering further monetary policy tightening after its recent interest rate hike.

The BOJ cut the offer amount for bonds with maturities between five and ten years to 425 billion yen ($2.73 billion). This is down from 475 billion yen offered during the previous operation in April.

It’s important to note that this amount remains within the previously announced range of 400 billion yen to 550 billion yen.

Minutes from the BOJ’s April policy meeting, released last week, hinted at a growing hawkish sentiment among board members.

This suggests the central bank may be open to further interest rate hikes following its first increase since 2007 in March.

The yield on the ten-year JGB rose 0.025 per cent to 0.93 per cent, while the two-year yield climbed 0.5 basis points to 0.32 per cent, reaching its highest level since July 2009.

However, the market reaction was somewhat muted as bond yields had already been under upward pressure due to rising US yields overnight.