TOKYO, March 19 (Reuters) - Japan's government bond (JGB) yields fell on Tuesday after the Bank of Japan ended eight years of negative interest rates and other remnants of its unorthodox stimulus, ushering in a new era of monetary policy for markets.
The 10-year JGB yield reversed its rise earlier in the session, dropping 3 basis points (bps) to 0.725%, its lowest since March 7.
The two-year JGB yield slipped 1 bp to a two-week low of 0.170%.
"Investors were relieved and they bought JGBs because the outcome of the BOJ's policy meeting was within their expectations," said Takeshi Ishida, strategist at Resona Holdings.
In a widely expected decision, the BOJ ditched a policy that applied a 0.1% charge on some excess reserves financial institutions parked with the central bank.
The BOJ set the overnight call rate as its new policy rate and decided to guide it in a range of 0-0.1% partly by paying 0.1% interest to deposits at the central bank.
The one-month treasury bill yield rose to 0.01% from negative 0.012%. The yield turned positive for the first time since April 2016 in the previous session, rising to as high as 0.05%.
The BOJ said it will keep buying "broadly the same amount" of government bonds as before and ramp up purchases in case yields rise rapidly.
But it will scale back the maximum limit of its purchases of JGBs at its regular bond buying operation, a move that allows the market to control yield movements.
(Reporting by Junko Fujita and Brigid Riley; Editing by Rashmi Aich)
