EXCLUSIVE: BOJ Mulling Making 10-Yr JGB Target More Flexible

July 22, 2018

Tokyo- The Bank of Japan is considering making its long-term bond yield target more flexible to help ease the adverse effects of its current massive monetary easing policy, Jiji Press learned Friday.

This issue will be on the agenda of the July 30-31 meeting of the central bank's Policy Board, informed sources said.

The move is also expected to make it easier for the BOJ to maintain its easing campaign for a prolonged period amid sluggish inflation.

At present, financial institutions are struggling with ultralow interest rates reflecting the BOJ policy. The Japanese government bond market's functions are also weakening due to the central bank's massive JGB purchases conducted under the policy.

The BOJ in September 2016 introduced the current target of guiding 10-year JGB yields to around zero pct.

In practice, the BOJ is conducting market operations to keep 10-year yields between zero and 0.1 pct.

At the upcoming board meeting, BOJ policymakers are expected to discuss options for calibrating the target. The BOJ may raise the target itself, tolerate some overshooting from the target or widen the practical range without changing the target.

But even if the BOJ takes any of these step, the central bank would stress that its fresh action does not mean that the bank is moving toward an exit from its current policy.

An internal affairs ministry report on Friday showed that the country's core consumer price index, excluding fresh food prices, rose 0.8 pct year on year in June, far below the BOJ's inflation target of 2 pct. Jiji Press