The Bank of Japan (BOJ) said on Monday it could trim the size of its buying in long-term government bonds in October compared to September, while increasing its buying in short-date bonds.

The move likely reflects the central bank's desire to keep the yield curve from flattening too much, as expectations of additional monetary easing steps keep long-term interest rates under downward pressure, analysts say.

In an announcement on its bond-buying plans for October, the BOJ said that it will cut its target purchase amount for four maturity categories for Japanese government bonds (JGBs) - three to five, five to ten, ten to 25 and 25 to 40-year bonds. It raised the target amount for one to three-year bonds.

“The BOJ will probably keep adjusting its market operations to prevent super-long yields from falling too much. But it's an extremely difficult, narrow path,” said Izuru Kato, chief economist at Totan Research.

“Trimming bond buying too much could trigger an unwelcome yen rise by giving markets the impression the BOJ is whittling down stimulus. But it needs to reduce buying to some extent to keep excessive declines in super-long yields in check,” he said.

Under a policy dubbed yield curve control (YCC), the BOJ pledges to guide short-term rates at -0.1 per cent and the 10-year government bond yield around 0 per cent. But recent falls in global bond yields have put pressure on Japanese long-term rates, briefly pushing 10-year yields below the -0.2 per cent level seen by markets as the BOJ's line in the sand.

While low long-term rates benefit companies that borrow money, they hurt financial institutions by narrowing the margin they earn from traditional lending business.

BOJ Governor Haruhiko Kuroda said on Tuesday that if the central bank were to ease monetary policy further, it would aim at pushing down short- and medium-term interest rates without flattening the yield curve too much.

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