BoJ pledges to steadily buy assets, provide liquidity
TOKYO: The Bank of Japan (BoJ) said it will "steadily" provide liquidity to support demand and Governor Masaaki Shirakawa warned about the risks a climb in bond yields posed to the nation's expansion.
"Volatile long-term rates can affect the economy, prices and financial conditions by influencing borrowing costs for households and companies," Shirakawa told reporters in Tokyo today after the central bank left its credit programs unchanged and kept the key interest rate between zero and 0.1 percent.
The BoJ's purchases of real-estate investment trusts and exchange traded funds have bolstered stock prices, a sign the stimulus has supported sentiment even as global growth slows. At the same time, an increase in bond yields suggests that higher interest rates may threaten the economic outlook and compel the BoJ to do more.
"Short-term rates are too high," said Shuichi Obata, senior economist at Nomura Securities Co. in Tokyo. "The BoJ should provide ample funds through money market operations to rein in gains in the short-term rates."
The rate decision was by a unanimous vote, as expected by all 16 economists surveyed by Bloomberg News. The BoJ left the size of its asset-buying fund at 5 trillion yen ($60 billion) and the credit program at 30 trillion yen.
"The bank will steadily purchase various financial assets and provide longer-term funds" so that "the effects of comprehensive monetary easing spread," the BoJ said in a statement in Tokyo today.
Yields on Japan's two-year government bonds and benchmark 10-year bonds have climbed this quarter, setting the stage for the biggest quarterly increases since the April-June period of 2008. -PB News