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.

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