Bank of Japan seeks to reduce its presence in bond markets3poker, the scale of purchases of treasury bonds proposed in regular operations on Monday fell from April 24.

The move could put upward pressure on Japanese government bond yields, potentially narrowing the huge spread between Japan and the United States, which is unfavorable for the yen. After the Bank of Japan announced the news, benchmark 10-year Japanese bond yields rose immediately, and the yen regained its earlier losses.

The Bank of Japan said it would buy 425 billion yen (US$2.7 billion) in 5-to 10-year bonds, compared with a corresponding purchase of 475.5 billion yen last month. The latest purchase size remains within the planned range for the current quarter. This is the first time since late December last year that the Bank of Japan has scaled back purchases.

"The BoJ's reduction in purchases was surprising, which could help boost yields," said Takahiro Otsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. "It's hard for the market not to see this as a response to the recent weakening of the yen, and the bond market may usher in more volatility."