Bank of Japan (BOJ) Governor Haruhiko Kuroda yesterday said that the bank’s latest tweaks on its bond yield control program were not the beginning of an exit of monetary easing, but a way to make it sustainable and run smoothly.
“This is definitely not a step toward an exit,” Kuroda said in a speech at an event hosted by business lobby Keidanren. “The bank will aim to achieve the price stability target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under the framework of yield curve control.”
His comments came after the policy adjustments last week to double the upper limit of the 10-year bond yield shocked global financial markets and sparked speculation that the bank was taking a step toward normalizing policy.
Photo: Kiyoshi Ota, Bloomberg
The change, which blindsided all 47 economists surveyed by Bloomberg ahead of the decision, has the potential to upend global markets as the cap has helped keep borrowing costs low worldwide.
Later in the week, Japan’s key inflation gauge accelerated to the fastest pace since 1981, continuing to fuel speculation that the bank would surprise markets again.
Kuroda yesterday said that the move was aimed at improving market functions after the deterioration of the nation’s bond market was observed. The governor, whose term is set to end in April, said that the bank would maintain its “utmost support” by keeping accommodative financial conditions.
“Labor market conditions in Japan are projected to tighten further and firms’ price and wage-setting behavior is also likely to change,” Kuroda said. “We are approaching a critical juncture in breaking out of the prolonged period of low inflation and low growth since the collapse of the bubble economy.”
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