The Japanese yen rose 3 percent against the U.S. dollar on Tuesday after the Bank of Japan (BOJ) modified its yield curve control (YCC) band, allowing long-term government bond yields to trade in a wider range.
The BOJ has decided to raise Japan’s 10-year government bond yields from 25 basis points to 50 basis points as part of efforts to enhance the sustainability of monetary easing, according to its policy statement (pdf).
The bank said that it would also increase monthly purchases of government bonds from 7.3 trillion yen ($55.16 billion) to 9 trillion yen ($67.5 billion) per month.
The yen surged following the move, but Japan’s Nikkei 225 plunged 2.46 percent to 26,568….