(Bloomberg) -- The Bank of Japan expanded the range of its planned bond purchases next quarter, allowing itself the possibility to dial back buying, as upward pressure on yields receded amid financial sector concerns.

The central bank will buy ¥100 billion to ¥500 billion ($752 million to $3.8 billion) of 10-to-25 year bonds per operation, compared with a range of ¥200 billion to ¥400 billion in the first quarter, according to its statement. It also widened the range of purchase amounts for other maturities above one year.

Japan’s 10-year yield has traded well below the 0.5% cap since March 10, when Silicon Valley Bank’s collapse jolted markets and spurred bets that the Federal Reserve will moderate its tightening. Some analysts had expected a cut to planned purchases and the lowering of the bottom of the ranges will allow that, while still offering policy makers flexibility.

“Only lowering the bottom range would have revived speculation of a yield-curve control tweak,” said Ataru Okumura, strategist at SMBC Nikko Securities Inc. “Now, close attention will be paid to the purchase amount in the first operation to see if the buying is near the bottom of the range.”

Earlier this year the central bank scooped up record amounts of bonds to cap yields. Much has changed since then, with a dovish tilt in the Fed’s latest decision reducing the pressure on incoming BOJ Governor Kazuo Ueda to pivot away from an ultra-easy policy. 

The International Monetary Fund said Friday the BOJ should avoid a premature exit from monetary easing and outline conditions for raising its negative interest rate in order to improve its communication. 

“Any changes to monetary policy settings will need to be well communicated to facilitate smoother transitions and protect financial stability,” the fund at the conclusion of its latest Article IV consultation report on Japan. 

The BOJ conducts two kinds of bond-buying operations, one with a fixed yield and the other for a fixed amount. In the former, it buys an unlimited quantity of debt at a predetermined yield, now at 0.5%. In the latter, it purchases a fixed amount of bonds at the prevailing market yield.

The table below shows the comparison of plans for the second quarter and the previous three months. The purchase amounts in billions of yen per operation and the frequency times per month.


--With assistance from Saburo Funabiki and Hidenori Yamanaka.

(Adds comment)

©2023 Bloomberg L.P.