(Reuters) – The Bank of Japan maintained ultra-low interest rates on Friday but took steps to make its yield curve control policy more flexible, underscoring a growing concern over the rising side-effects of prolonged monetary easing.
At the two-day meeting that ended on Friday, the central bank kept unchanged its short-term interest rate target at -0.1% and that for the 10-year government bond yield around 0%.
It also maintained guidance allowing the 10-year yield to move 0.5% up and down each around the 0% target, while saying those would be “references” rather than “rigid limits”.
MARKET REACTION:
The dollar reversed declines against the yen to surge as much as 1.22%. Japan’s Nikkei share average pared the morning session’s decline to last be down 0.38%. The benchmark 10-year Japanese government bond yield remained at 0.5%, the BOJ’s policy ceiling under YCC.
COMMENTS:
MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE
“The BOJ seems to be stirring some confusion and that is being reflected in price action. But with the Nikkei report setting an expectation for the BOJ to discuss widening their YCC band, anything short of actually widening it comes as a bit of a disappointment. And that has seen the yen hand back some of the strength it gained following the original Nikkei report.”
“Still, it seems clear that the BOJ is setting the stage to widen and eventually abandon YCC.”
(Reporting by Asian bureaus; Compiled & edited Subhranshu Sahu)
