Toshihiko Fukui, governor of the Bank of Japan, sought to calm Japanese bond market jitters yesterday by damping speculation of an early interest rate rise .

Giving testimony to parliament, Mr Fukui said: "We will not immediately head towards tightening."

Referring to the super-loose policy abandoned last week, a month earlier than many commentators had expected, he said: "It is too early to discuss when to end the zero-interest rate policy as we have only just ended our quantitative easing framework."

Under quantitative easing, adopted in 2001, the bank floodedthe financial system with excess liquidity. It is likely to take at least three months to drain liquidity, during which time the bank has said overnight rates will stay at "effectively zero".

Mr Fukui's comments put a brake on recent sharp rises in Japanese government bond yields, but without reversing them. The yield on the benchmark 10-year bond ended the day unchanged at 1.720 per cent, compared with 1.605 per cent just a week ago.

Akihiko Yokoyama, bond strategist at JP Morgan, said Mr Fukui remained hawkish but wanted to prevent the financial shock of excessively sharp rises in bond yields.

Mr Yokoyama said the governor was likely to alternate between hawkish and dovish comments in the coming months - (Financial Times service)