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BOJ chief denies possibility of raising gov’t debt yield target

  • March 24, 2017
  • , Kyodo News
  • English Press

The Bank of Japan’s chief said Friday the central bank would not raise its long-term government debt yield target despite recent rises in overseas interest rates putting upward pressure on Japanese yields.


The BOJ’s “monetary policy should be designed to achieve the price stability target of 2 percent, responding to the situation in Japan’s economy,” BOJ Governor Haruhiko Kuroda said in a speech in Tokyo, referring to the bank’s inflation goal.


“The bank will not raise the target level of the long-term interest rates just because of a rise in such rates in other countries,” he added.


Last week, the BOJ decided at its policy meeting to maintain its current aggressive monetary easing measures, after the U.S. Federal Reserve announced overnight its second rate hike since December.


In September last year, the BOJ adopted a “yield curve control” policy, aimed at keeping the 10-year government debt yield around zero percent by adjusting the amount of its bond purchases. Yields move inversely to debt prices.


Should the Japan-U.S. interest rate gap broaden, the yen would fall against the dollar, which could prod more investors to sell safe-haven Japanese government bonds with demand surging for stocks of Japan’s export-oriented manufacturers.


As Japan’s long-term interest rates are expected to continue to rise, skepticism is mounting in the market about whether the BOJ can keep controlling the long-term yield as it hopes.


“In financial markets, some argue that the bank will have difficulties with Japanese government bond purchases in the future and lose its control over long-term interest rates eventually,” Kuroda said.


“That will not happen. In fact, yield curve control is designed to be highly sustainable,” he added.


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