The Bank of Japan is purchasing government bonds at a record pace this year, a factor that likely prompted its recent move to allow larger yield movements so as to reduce the strain on its control of longer-term interest rates.
Doubling the effective cap on benchmark yields in December and again last month has yet to significantly reduce the BOJ’s bond buying, raising the possibility that more changes will be needed to help rein in purchases.
The increase in buying after each policy tweak also raises the question of whether the BOJ moved too slowly in adjusting its settings, given how aggressively it had to respond to stop investors pushing yields too far.