The Bank of Japan's decision to explicitly control sovereignbond yields will probably cap interest rates, bolstering demand forcorporate debt offering extra premiums, according to analysts.

The BOJ added what it calls “ yield curve control” to itsstimulus mix on Wednesday and said it will seek to keep the yieldon the 10-year government bond “around zero.” The average yield onJapanese corporate bonds ended that day at 0.24%, according toNomura BPI indexes, compared with minus 0.035% for the nation's10-year debt.

“Investors are going to have to continue to invest in creditproducts such as corporate bonds to get spreads because lookingover a long period we aren't likely to see a big jump in interestrates,” said Hidetoshi Ohashi, the chief credit strategist in Tokyoat Mizuho Securities Co., a unit of Japan's third-largest lender.While the BOJ has tweaked its policies, inflation expectationsaren't likely to rise because of it, and market borrowing rateswill probably stay low for a very long time, he said.

The BOJ vowed to continue stimulus measures “for as long as itis necessary” to achieve its 2% inflation target and refrained fromgiving a time frame. The central bank will probably try to keeplonger-term interest rates from rising too much from currentlevels, which could help drive sales of longer corporate notes anddemand from investors for even lower-rated issuers' debt, accordingto Daiwa Securities Group Inc.

“If longer-term interest rates are kept stable, investors willbe able to buy super-long-term bonds with more confidence becauseof less risk of price falls,” said Toshiyasu Ohashi, the chiefcredit analyst at Daiwa Securities in Tokyo. While the sale ofnotes maturing in 10 years or more had slowed with a steepening ofyields in August, there could be a renewed “rush” in suchofferings, he said.

Japanese corporate bond sales have risen 44% to 9.1 trillionyen ($90 billion) so far this year over the same period a yearearlier. Issuance of company debt with maturities of 10-years ormore has doubled to 5.9 trillion yen in the period, according todata compiled by Bloomberg.

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