TOKYO, Jul 28 (Reuters) - The Bank of Japan is set to keep ultra-low interest rates on Friday but may make minor tweaks to extend the lifespan of its yield control policy, which is facing scrutiny amid prospects of sustained inflation.
The Nikkei newspaper reported the central bank will maintain its 0.5% cap for the 10-year government bond yield, but discuss allowing long-term interest rates to rise above that level by a certain degree.
The move would be intended to fix distortions caused in markets by the BOJ's heavy bond buying, and accompanied by steps to combat any abrupt rise in long-term rates, the paper said without citing sources.