TOKYO: Japan’s 10-year government bond (JGB) futures slipped on Tuesday after the Bank of Japan modified its bond yield control to re-define the 1% cap as an “upper bound” with room for allowances.

The 10-year futures fell as much as 0.36 points to 143.73 after the decision, while the 10-year bond yield was unchanged at 0.930% from the midday close.

The 10-yield hit 0.955%, a fresh decade high, earlier in the session amid speculation that the BOJ would decide to raise the yield cap at its policy meeting.

As widely expected, the BOJ maintained a 0.1% interest rate on financial institutions’ excess reserves parked with the central bank, and a 0% target for the 10-year government bond yield set under its yield curve control (YCC) policy.

JGB yields rise to fresh 10-year peaks ahead of BOJ policy decision

But the BOJ said it will now regard the upper bound of 1% for the 10-year JGB yield as a reference and continue large-scale bond buying and nimble market operations.

“It (the new reference range) suggests they will allow yields to rise above 1%, while still trying to keep the changes to policy very subdued.

Speculation of an eventual removal of the YCC will continue to build,“ said Charu Chanana, a market strategist at Saxo in Singapore.