The Bank of Japan said on Wednesday it has decided to offer to buy an unlimited amount of 10-year Japanese government bonds (JGB) at 0.25%, in its third move since February to defend its yield target.

The yield on the 10-year JGB rose to as high as 0.25% in early trade, touching the upper limit of the target.

The rise in yields comes as the yen weakens sharply to two-decade lows against the U.S. dollar, forcing markets to test the central bank’s commitment to its super easy yield-curve-control policy.

“The Bank of Japan has no other choice than to keep offering unlimited purchase of JGBs,” said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan Securities.

“If the central bank allows 10-year bond yields to keep going up, its message to the market would become unclear.”

The BOJ’s current guidance is that it will allow the 10-year yield to move flexibly around its 0% target as long as it stays below the 0.25% upper limit.

With the economy still weak and inflation modest compared with Western economies, the BOJ has stressed its resolve to keep monetary policy ultra-loose even as the U.S. Federal Reserve has been set to raise rates to stem soaring inflation.

BOJ Governor Haruhiko Kuroda said on Monday the yen’s recent moves had been “quite sharp” and could hurt companies’ business plans, offering his strongest warning yet of the risks stemming from the currency’s depreciation.

Kuroda, however, repeated his view that the BOJ must maintain its massive stimulus programme to support a fragile economic recovery.

The central bank offered to buy unlimited amounts of 10-year bonds at 0.25% in February and March.

Reuters