BOJ relaxes bond yield control scheme
Yen hits 1wk high; Nikkei sags, bank shares surge
10year JGB yields leap above 0.5 target

SYDNEY, July 28 Reuters The yen gained in volatile trade on Friday and stocks and bonds dropped in Tokyo after the Bank of Japan made another baby step away from years of ultraloose monetary policy, while hopes for stimulus had Chinese stocks heading for their best week of the year.

The Bank of Japan maintained its superlow interest rates but shifted slightly on yield curve control, saying its 0.5 limit on 10year government bond yields was now a reference and offered to buy such bonds at 1 in the market instead.

The BOJ39;s shift caps a big week for central banks, with interest rate rises in the U.S. and Europe in recent days seen as the final moves in the most aggressive hiking cycle in a generation.

It could also have seismic implications for global money flows, since a cheap yen that39;s been inexpensive to borrow has been a mainstay of capital market funding for years and it now faces upward pressure from rising Japanese yields just as global rates seem to peak.

Tenyear Japanese government bond yields hit a nineyear high of 0.575 and the Nikkei dropped 0.4, with financial stocks surging in anticipation of higher rates.

The yen which had gained for days on speculation of a BOJ move, was choppy after the announcement, before gaining to hit a weekhigh of 138.05 to the dollar.

They39;ve changed yield controls without committing to too…