* BOJ says will reduce frequency of bond-buying operations
* BOJ’s buying of conventional JGBs to fall by 9%
* Move reflects BOJ’s resolve to have yields fluctuate more
* BOJ says must balance market function, control on yields (Adds comments from BOJ official, context on BOJ’s stance on bond buying)
TOKYO, March 31 (Reuters) - The Bank of Japan plans to reduce the total amount and frequency of its bond purchases in April from March, the central bank said on Wednesday, following its decision earlier this month to widen the target range of the 10-year government bond yield.
The move underscores the central bank’s resolve to allow yields to fluctuate more around its 0% target, which was one of the key purposes of a policy review it conducted in mid-March.
The BOJ will buy short- to long-dated bonds four times next month, compared with five times in March, and will buy super-long bonds only once, compared with twice in March, it said.
As a result, the BOJ’s buying of conventional JGBs is expected to fall by about 9% to 5.9 trillion yen ($53.33 billion) in April, compared to 6.45 trillion yen in March.
JGB futures price fell about 15 ticks to 151.00 in after-hour trading as the reduction was bigger than expected.
“It was a bit of surprise that the BOJ cut its buying in five- to ten-year bonds quite a bit, the maturity in which markets weren’t expecting the BOJ to reduce buying,” said Ryosuke Matsuzaki, market analyst at Mizuho Securities.
The BOJ said it will buy 450 billion yen of those maturities four times, which will add up to monthly total of 1.8 trillion yen.
Until March, they were the tenors the BOJ used to buy the most, with the BOJ buying 420 billion yen of them five times a month
In April, JGBs with one to three years to maturity will become the biggest target of the BOJ’s buying.
The BOJ said it reviewed the frequency and amount of bond buying for April taking into account demand for its operations as well as the market’s supply and demand.
“It’s important to balance the need to maintain market functions and control interest rates,” a BOJ official told Reuters, adding the priority was to keep yields stably low as the COVID-19 pandemic weighs on the economy.
The BOJ slightly loosened its grip on long-term interest rates in mid-March and laid the groundwork to taper its huge asset purchases, as part of steps to make its stimulus sustainable enough to weather a prolonged battle to fire up inflation.
Sources have told Reuters the BOJ will take a more hands-off approach in bond buying operations from April as it seeks to breathe life back into a market made dormant by its huge presence. ($1 = 110.63 yen) (Reporting by Tokyo Markets Team; Additional reporting by Takahiko Wada and Leika Kihara; Editing by Andrew Heavens and Kim Coghill)