Policymakers at the Bank of Japan have modified the yield curve control on the long-term rate again. The central bank redefined the 1 percent threshold as an upper limit with room for allowance, rather than a rigid cap.

The announcement came after the BOJ wrapped up its two-day policy meeting on Tuesday.

As widely expected, it will keep its short-term benchmark interest rate in negative territory and will continue asset purchases to keep long-term rates around zero percent.

But BOJ officials said they decided to increase the flexibility of the YCC. The bank will conduct yield curve control on 10-year Japanese government bonds, with an upper bound of 1 percent as a reference.

In the bond market, the yield on Japan's 10-year government bonds has risen to the highest level in a decade, hitting 0.955 percent for the first time since May 2013.

The BOJ decided in July to allow the yield on these bonds to rise up to the 1 percent level to contain inflationary pressure.

But it decided that strictly limiting the upper limit of long-term interest rates can have significant side effects, deciding this time to make policy operations more flexible to respond to market trends.