The Bank of Japan came into the market for the second time this week to slow gains in benchmark sovereign bond yields, underscoring its determination to curb sharp moves in rates even as it makes room for them to rise.

The central bank announced an unscheduled operation to buy 400 billion yen ($2.8 billion) of securities across various maturities after the yield on the benchmark 10-year note touched a fresh nine-year high of 0.65%. The intervention pushed the rate fractionally below this level but still well above where it traded last week before the BOJ adjusted policy.

The buying operation Thursday also highlighted the challenge in interpreting a rates regime that’s built on gray lines to let the BOJ be flexible rather than provide clarity for markets. The impact was felt immediately in the currency market, with the yen weakening.

BOJ Shock Has Wall Street Gaming Out the Global Spillovers

The prospect of an increase in JGB yields is rippling through global bond markets. Japanese investors, with ultra-low interest rates at home, are the biggest foreign holders of US government debt and own everything from European bonds to Brazilian notes. Each incremental yield gain at home may boost the incentive for them to repatriate funds.

The central bank on Friday kept its formal target for 10-year yields at around 0%, while saying its 0.5% ceiling would become a reference point, not a rigid limit, and that it would offer to buy 10-year debt at 1% each day.

While this final point suggests an effective doubling of the movement range for yields, the BOJ’s intervention in the market also indicate movement toward 1% will be actively managed.

BOJ Watchers See No Further Policy Shift in 2023 After Tweak

(Adds chart and details of BOJ operation.)