Bank of Japan Keeps Monetary Easing Policy with Yield Control

The Yomiuri Shimbun

17:17 JST, September 22, 2023

The Bank of Japan decided to continue large-scale monetary easing on Friday, maintaining its yield curve control and other measures.

The yield curve control is designed to guide the short-term interest rate to minus 0.1% and keep the yield on 10-year Japanese government bonds (JGBs) around zero.

At its monetary policy meeting on the day, the BOJ decided to continue to set the upper limit of the long-term bond yield at 1% in line with economic and price conditions, while allowing the yield to fluctuate in the range of around “plus or minus 0.5%.”

At the previous policy meeting in July, the central bank effectively raised the upper limit to 1%. As a result, interest rate levels in the market have been rising. The BOJ intends to assess the effects of its policy measures with an aim to achieve its inflation target of 2% in a sustainable and stable manner, accompanied by wage increases.

In the Tokyo bond market, the yield on 10-year JGBs, a leading indicator of long-term interest rates, has been hovering above 0.7% against the backdrop of economic recovery and a rise in U.S. interest rates. At the meeting on Friday, BOJ policy board members appear to have looked into the impact of rising interest rates.

In Japan, price increases appear to be partly attributable to wage hikes from labor shortages and other factors, although soaring prices due to higher raw material costs have slowed down. The BOJ intends to consider changing its monetary easing policy once it is convinced that the inflation target will be achieved.

“Looking at the circumstances on prices, there have been positive signs in setting wages, but the achievement of our price target is not yet in sight,” BOJ Gov. Kazuo Ueda said at a press conference after the policy meeting on Friday. “We will persistently continue monetary easing.”