A tumultuous week for Japanese bonds headed for an unexpectedly calm conclusion as the central bank maintained its purchases of benchmark sovereign bonds on Friday.
The Bank of Japan offered to buy ¥400bn ($3.6bn) of five-to-10 year debt at its regular operation. That’s on top of a similar amount bought at a surprise offer on Thursday, when it acted to prevent the 10-year yield from climbing. The BoJ also maintained purchases of super-long debt, amid expectations that it may trim them.
The rule-book for the BoJ’s behaviour, once as formal as court rituals, is getting rewritten after Governor Haruhiko Kuroda said on Tuesday he would allow the 10-year yield to trade as much as 0.2 percentage points above or below its 0% target. 
Traders have since sought to test those boundaries, pushing the benchmark yield higher to see when the central bank would step in to stamp its authority with an offer to buy an unlimited amount of bonds.
“Seeing how markets are racing ahead with wanting to see the BoJ’s tolerance, the central bank probably decided not to add fuel to this momentum and refrained from cutting super-long maturities, although it probably really wants to,” said Mari Iwashita, chief market economist at Daiwa Securities Co in Tokyo.
“With this, and including yesterday’s irregular operation, the BoJ has shown what flexibility in operations is.”
The benchmark 10-year yield was unchanged at 0.115% in Tokyo. The central bank on Friday offered to buy ¥180bn of 10-to-25 year debt, and 60bn of bonds due in more than 25 years, the same as its last operation on July 25. Even so, analysts have said that the bond market will be keen to continue its push toward the 0.2% mark for the benchmark yield. 
That could see the BoJ hold more out-of-schedule debt purchases or to conduct a fixed-rate operation, adding to the three it held in the week before its policy decision on July 31.
Kuroda’s tolerance for wider yield fluctuations has shattered the calm in Japan’s market, with 10-year government debt futures sliding by the most in almost two years on Wednesday - a move that prompted an emergency margin call from the clearing house. The 10-year yield touched 0.145% on Thursday, its highest in 18 months.
Repercussions are being felt far beyond the Asian nation’s shores, with yields in the US and Germany climbing in an immediate reaction to the rise in Japanese yields following the BoJ’s meeting.
Market participants expect the advance in JGB yields to increase the attraction of longer-maturity debt for Japan’s investors, which could tempt them to bring home some of the $2.4tn funds they have parked in overseas debt. 
A sale of 20-year French bonds on Thursday witnessed the weakest demand since at least 2007, with some analysts seeing it as an indication of reduced Japanese appetite.
Japan’s 10-year yield has almost quadrupled since closing at 0.03% on July 20. The spurt was initially triggered by speculation that the BoJ would adjust its ultra-loose policy, which has led to market distortions and weighed on profitability of Japanese banks.
While Kuroda acknowledged that criticism on Tuesday and took steps to reduce these side effects, he continued to commit to “continuous powerful monetary easing” as the central bank struggles to reach its 2% inflation target.