TOKYO : The Bank of Japan (BOJ) has tweaked its bond yield control policy and will allow interest rates to rise more freely, action that market participants have interpreted as the start of a slow shift away from decades of massive monetary stimulus.Since 2016, the BOJ has guided short-term interest rates
TOKYO : The Bank of Japan has tweaked its bond yield control policy and will allow interest rates to rise more freely, action that market participants have interpreted as the start of a slow shift away from decades of massive monetary stimulus.
With the inflation rate staying above the BOJ's 2 per cent target for longer than it expected, there was a risk of the 10-year yield challenging the cap again. The bank has forestalled the risk by deciding to intervene only when the 10-year yield could breach 1.0 per cent. That left the onus on the BOJ to keep unwelcome yen falls at bay. Ueda said exchange rate volatility was among the side effects of YCC that the BOJ was watching out for.The BOJ could have removed the allowance band altogether or raise the yield target.
If they are convinced inflation will consistently move around 2 per cent backed by solid wage growth, the BOJ could remove the yield cap and shift to a policy solely targeting short-term interest rates.
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