The rapid run-up in JGB yields spooked policymakers. In years past, Japan's central bank has come to the rescue in volatile markets by buying bonds and stocks. However, under Governor Kazuo Ueda, the BOJ has committed to shrinking its balance sheet, leaving the finance ministry to take the lead in calming markets.

The Bank of Japan left its benchmark rate unchanged and unveiled a plan to slow its withdrawal from the bond market from next year in a sign of caution following heightened market volatility.

The Bank of Japan decided Tuesday to further reduce its monthly government bond purchases beyond April next year, but at a slower pac