TOKYO, Jan 18 Reuters The Bank of Japan on Wednesday amended rules for a fundssupply market operation to make it usable as a tool for preventing longterm interest rates rising too much, in a show of resolve to maintain its yield curve control YCC policy for the time being.

Under the amended rules, the central bank can make both fixedrate and variablerate loans of up to 10 years39; duration against collateral to financial institutions.

Before the change, the BOJ was able to offer funds for as long as 10 years only as fixedrate loans. By adding variablerate loans, it can use the fundssupply operation as a tool to control the shape of the yield curve, analysts say.

The BOJ shall determine the interest rate of each loan in order to encourage the formation of a yield curve that is consistent with the guideline for market operations, taking into account market prices of Japanese government bonds for each maturity, the central bank said in a statement.

After announcing the new rules, the BOJ said it would offer fiveyear loans under the fundssupply operation with a duration of between Jan. 24, 2023 and Jan. 24, 2028.

The BOJ has struggled to defend a 0.5 cap on the 10year bond yield set under YCC, as investors have sold off bonds in anticipation of a tweak to its ultraloose monetary policy.

The rule change for the fundssupply operation was announced in tandem with the central bank39;s decision on Wednesday to make no changes to YCC, including the yield cap.

Takafumi…