Tokyo, July 28 (AFP\/APP): The Bank of Japan on Friday eased its grip on its ultra-loose monetary policy in a small step towards normalisation as inflation accelerates and the yen comes under pressure against other major currencies.<\/p>\n
The central bank has for years embarked on a process known as yield curve control (YCC) where it allows government bonds to move in a narrow band as part of a drive to boost the long-struggling economy.<\/p>\n
However, after a closely watched meeting, it said it would allow “greater flexibility” in the market as it hiked its inflation forecast for the current fiscal year.<\/p>\n
Still, officials said it did not mean the bank was abandoning its monetary policy — which analysts have warned was looking increasingly unsustainable — saying it would maintain its massive asset-buying measures.<\/p>\n
Ten-year JGB yields would be allowed to “fluctuate in the range of around plus and minus 0.5 percentage points from the target level”, the bank said in a statement.<\/p>\n
But it will “conduct yield curve control with greater flexibility regarding the upper and lower bounds of the range as references, not as rigid limits”, the bank said.<\/p>\n
“The Bank will offer to purchase 10-year JGBs at 1.0 percent every business day through fixed-rate purchase operations,” it added.<\/p>\n
Market expectations fluctuated in the lead up to the meeting over whether the bank would tinker with its signature stimulus policies after the two-day meeting chaired by Governor Kazuo Ueda, who took the helm in April.<\/p>\n
“Allowing greater flexibility in YCC will help us respond to fluctuation risks more expeditiously, improve the sustainability of monetary loosening and realise the two percent inflation target in a stable and sustainable manner that comes with wage increases,” Ueda told a press conference.<\/p>\n
“If the long-term interest rate were to be rigorously capped at 0.5 percent, that could affect the way the bond market functions or bring more volatility in the financial market,” he said.<\/p>\n
“We hope that allowing more flexibility in YCC could help ease these concerns.”<\/p>\n","protected":false},"excerpt":{"rendered":"
Tokyo, July 28 (AFP\/APP): The Bank of Japan on Friday eased its grip on its ultra-loose monetary policy in a small step towards normalisation as inflation accelerates and the yen comes under pressure against other major currencies. The central bank has for years embarked on […]<\/p>\n
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