Bank of Japan policymakers discussed the merits of allowing longterm yields to move more flexibly around the banks target, a summary of opinions at their January meeting showed, a sign the idea will be a key element of its policy review in March.
As the coronavirus pandemic forces it to maintain a massive stimulus programme for a prolonged period, the BOJ plans to announce in March ways to make its tools more sustainable.
With our monetary easing steps to be prolonged, allowing the 10year government bond yield to move upward and downward to some extent … will contribute to financial system stability, said one member, according to the summary released on Friday.
Allowing 10year yields to move more widely likely wont hurt the economy much, because most money raised by households and companies arent directly affected by longterm rate moves, another opinion quoted in the summary showed.
The comments are the strongest hints to date that the BOJ will allow longterm rates to deviate further from its 0 target in its March policy review.
Its crucial for the BOJ to conduct yield curve control and purchases of assets such as exchangetraded funds ETF more flexibly, another opinion showed, suggesting the March review will also result in some tweaks to its huge ETF purchases.
The BOJ announced on Friday its bondbuying plan for February that signalled its readiness to scale back buying for shorterdated government bonds.
Under yield curve control YCC, the BOJ guides shortterm…