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July 12 (Bloomberg) -- Japan’s 10-year note yield dropped to the lowest since 2003 after the central bank unexpectedly increased its asset-purchase program for a third time this year.

The five-year rate also fell to levels unseen since June 2003 after the Bank of Japan expanded its asset-purchase fund to 45 trillion yen ($564 billion) from 40 trillion yen. Seven of 17 economists surveyed by Bloomberg News predicted monetary easing. The BOJ said it would increase purchases of treasury bills and remove the minimum bidding yield for the securities.

“Cutting the bidding yield to zero means that the BOJ is going to buy as many bills as it can from financial companies,” said Kazuhiko Sano, the chief strategist at Tokai Tokyo Securities Co., one of 25 primary dealers obliged to bid at government debt sales. “It’s a positive for short-term notes. Because of the unexpected step, bonds are being bought.”

The benchmark 10-year yield fell two basis points to 0.765 percent as of 4:32 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. It was the lowest level since June 2003. The five-year rate declined one basis point to 0.175 percent.

To contact the reporter on this story: Yumi Ikeda in Tokyo at

To contact the editor responsible for this story: Rocky Swift at

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