TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank’s basic stance is to allow market forces to set long-term interest rates, keeping a near-term tapering of its huge bond buying on the table.
Deputy Governor Ryozo Himino also told a seminar on Tuesday that the BOJ will balance the need to allow market forces to drive long-term interest rates higher, while avoiding an abrupt spike in bond yields.
The remarks heighten the chance the nine-member will debate at its June 13-14 policy meeting whether to offer clearer guidance on how the BOJ will scale down its huge bond buying.
Speaking in parliament, Ueda said the BOJ has maintained its roughly 6-trillion-yen ($38.7 billion) monthly pace of bond buying to avoid causing any market disruptions from a decision in March to exit its massive stimulus programme.
“Our basic stance is to allow long-term interest rates to be driven by market forces,” though the BOJ will respond to any spike in bond yields with “nimble” market operations, he said.
In a seminar in Tokyo, deputy governor Himino also said it was “desirable” for markets to set long-term interest rates.
“On the other hand, the BOJ has been deeply involved in the bond market up till very recently and our presence remains very large. We need to avoid causing discontinuity or any unintended moves in the market,” he said.
Until ending its yield curve control policy in March, the BOJ had been buying huge amounts of government bonds to cap the 10-year bond yield around zero.
With that policy ditched, Ueda had repeatedly said the BOJ will eventually scale back its huge bond buying. But he had held off on offering any clue on how soon it will start.
A recent slew of hawkish comments from BOJ policymakers, and an unscheduled reduction the BOJ made to its bond-buying on May 13, have left traders on alert over the chance of further cuts.
Heightening market expectations that the BOJ would decide on a full-fledged bond tapering plan at next week’s meeting have driven the benchmark 10-year Japanese government bond yield to a 13-year high of 1.1% on Thursday.
($1 = 155.1100 yen)
Source: Economy - investing.com
