Japan’s central bank seeks to overhaul its policy
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”.
Pedestrians stand in front of a monitor displaying the stock market index in Tokyo yesterday.