BoJ Minutes: To keep sustaining Yield Curve Control to support wage growth
The Bank of Japan (BoJ) Board members shared their views on monetary policy outlook and Yield Curve Control (YCC), per the BoJ Minutes of the October meeting.
Key quotes
“Members agreed need to patiently maintain the current easy policy.”
“Several members said must sustain YCC to continue supporting wage growth.”
“Another member said must confirm wage, inflation cycle in determining whether sustained achievement of price goal can be eyed.”
“One member said the chance of Japan achieving sustained 2% inflation heightening, BOJ must gradually adjust the degree of monetary easing.”
“Several members said Japan's price developments might become a factor pushing up long-term interest rates.”
“One member said 10-year JGB yield may reach 1% depending on US Treasury market, domestic price developments.”
“Many members said side-effects on markets, corporate funding could become large if the BOJ keeps tight control on JGB yield.”
“Several members said making YCC flexible would help diminish speculative moves in the market, make the framework more sustainable.”
Market reaction
Following the BoJ Minutes, USD/JPY was down 0.11% on the day at 142.07.
Bank of Japan FAQs
What is the Bank of Japan?
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
What has been the Bank of Japan’s policy?
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
Is the Bank of Japan’s ultra-loose policy likely to change soon?
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.