Ja­pan’s cen­tral bank seeks to over­haul its pol­icy

The Myanmar Times - - Business -

JA­PAN’S cen­tral bank (BoJ) un­veiled an over­haul of mon­e­tary pol­icy yes­ter­day, pledg­ing to dou­ble down on its at­tempts to stoke in­fla­tion and kick­start the tor­pid econ­omy.

Af­ter a hotly an­tic­i­pated meet­ing, the Bank of Ja­pan said it would set a tar­get for 10-year govern­ment bond yields, aim­ing to push them higher, while hold­ing off a fur­ther cut in in­ter­est rates into neg­a­tive ter­ri­tory.

It also loos­ened its an­nual as­set­buy­ing tar­get – a key fea­ture of its more than three-year-old pol­icy – say­ing it could in­stead fluc­tu­ate to give it flex­i­bil­ity while fo­cus­ing on keep­ing bond yields steady.

The bank also pledged to con­tinue mon­e­tary eas­ing as needed un­til it hits and sta­bilises in­fla­tion at its 2 per­cent tar­get.

“The fact that it pledged to keep the cur­rent pol­icy un­til it achieves its 2pc in­fla­tion tar­get can be in­ter­preted as ex­pan­sion of eas­ing pol­icy,” said Ya­suhide Ya­jima, chief economist at the NLI Re­search In­sti­tute.

The an­nounce­ment – hours be­fore the US Fed­eral Re­serve wraps up its lat­est meet­ing – ap­peared aimed at crit­ics of the BoJ, in­clud­ing banks and in­surance com­pa­nies that have been hit by its neg­a­tive rate pol­icy.

Neg­a­tive rates are meant to en­cour­age lend­ing to peo­ple and busi­nesses by ef­fec­tively charg­ing banks to keep ex­cess re­serves in the BoJ’s vaults. But com­mer­cial lenders have com­plained they are eat­ing into their fi­nan­cial re­sults. The cen­tral bank said it would lift con­trols on ma­tu­ri­ties of the bonds it buys un­der the huge as­set-pur­chase plan – there are con­cerns that the bank is run­ning out of govern­ment bonds that it can buy.

The ad­just­ments came as the BoJ re­leased an un­prece­dented re­port card on its own poli­cies – a cor­ner­stone of Prime Min­is­ter Shinzo Abe’s growth drive, dubbed Abe­nomics.

In its re­view, the bank blamed its fail­ure to hit its in­fla­tion tar­get on a drop in oil prices, a sales tax hike at home in 2014 that dented spend­ing, and trou­ble in over­seas economies.

Still, the bank said its poli­cies have “trans­formed peo­ples’ per­cep­tion of in­fla­tion and ... led to a rise in in­fla­tion ex­pec­ta­tions”.

Photo: EPA

Pedes­tri­ans stand in front of a mon­i­tor dis­play­ing the stock mar­ket in­dex in Tokyo yes­ter­day.

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