Bank of Japan March meeting summary – Policy to remain easy
Members dismissed the notion that the BOJ would have to raise its 10-year government bond yield target due to gains in bond yields overseas
Bank of Japan board members said easy monetary policy will be in place for some time because consumer price growth is still distant from the central bank’s 2 percent inflation target, a summary of opinions from their March 15-16 meeting showed on Monday.
Members dismissed the notion that the BOJ would have to raise its 10-year government bond yield target due to gains in bond yields overseas, and instead said it should focus solely on the domestic economy.
However, some members did express concern about the BOJ’s ability to control the 10-year yield in the future.
“Some market participants argue that the Bank needs to change the monetary policy in response to the rise in the long-term yields overseas,” one member said.
“However, the monetary policy in Japan should be decided based on Japan’s economic activity and prices. It will be a considerable length of time before the Bank will need to change its monetary policy.”
At the meeting, the BOJ kept policy on hold and Governor Haruhiko Kuroda pushed back against speculation that the BOJ will raise its target for the 10-year bond yield sometime this year.
The BOJ maintained its short-term interest rate target of minus 0.1 and a pledge to guide the 10-year government bond yield at around zero percent.
It also kept intact a loose pledge to maintain the pace of its annual increase in Japanese government bond (JGBs) holdings, which is 80 trillion yen ($723.98 billion).
The economy has shown signs of life recently with stronger exports and industrial production, but concerns about the vigor of domestic demand linger because core consumer prices rose only 0.1 percent on-year in January.
One member was doubtful about the price trend because wage increases for next fiscal year, which starts in April, are likely to be less than the current fiscal year, the summary of opinions showed.
The BOJ increased its government debt purchases substantially last month to cap a rise in yields, which revealed the weakness of the BOJ’s policy to control the shape of the yield curve, another member said.
This suggests the BOJ could be forced to purchase a large amount of government debt in the future to achieve its yield target, this member said.