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Yen and bond yields rise after BOJ pledges more flexibility to yield curve control


The Japanese yen rose on Friday morning in Asia, on the back of a report that the Bank of Japan could potentially “discuss tweaking” its yield curve control policy at today’s policy meeting.

The yen was hovering around the 139.37 mark against the U.S. dollar at about 10:30 a.m. Hong Kong/Singapore time.

Currency markets seem to be testing the waters after Nikkei reported the BOJ will let long-term interest rates rise beyond its cap of 0.5% “by a certain degree” at its monetary policy meeting today.

Yields for 10-year Japanese government bonds (JGBs) rose 7 basis points to 0.505%. It was the highest since March.

Under its yield curve control policy, the central bank targets short-term interest rates at -0.1% and the 10-year government bond yield at 0.5% above or below zero.

“The proposed change would keep the rate ceiling, but allow for moderate rises beyond that level,” Nikkei said.

Japan’s core consumer price index climbed 3.3% year-on-year in June, slightly higher than the 3.2% recorded in May.

With inflation having exceeded the BOJ’s 2% target, concerns are rising that Japan’s relatively low interest rates have made the yen less attractive and vulnerable to selling.

Central banks around the world have raised rates aggressively to rein in on inflation, but Japan has continued to maintain an ultra-loose monetary policy and kept rates low.

On Friday, the Tokyo’s core consumer price index, which excludes volatile fresh food but includes fuel costs, rose 3.0% in July from a year ago. That’s slightly more than the 2.9% expected in a Reuters consensus poll.

— CNBC’s Lim Hui Jie contributed to this report.

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