2023-07-18 19:25:35
© Reuters. Bank of Japan Governor Kazuo Ueda during a press conference in Tokyo May 25, 2023 REUTERS/Kim Kyung-Hoon
By Leika Kihara and Tetsushi Kajimoto
(Reuters) – Bank of Japan Governor Kazuo Ueda said on Tuesday there was still some distance to sustainably and stably hit the central bank’s 2% inflation target, a sign that it is determined to keep monetary policy ultra-loose for now.
“We are patiently proceeding with our ultra-easy monetary policy under yield curve control (YCC)” with due regard to the impact on financial intermediation and market functioning, Ueda told a news conference after attending a meeting of G20 financial officials. in India.
Ueda said the Bank of Japan will review at each monetary policy meeting the pace of Japan’s progress towards sustainably reaching its 2% target.
“If our assumption (that sustainably reaching the 2% inflation target remains distant) remains unchanged, our overall narrative on monetary policy will remain unchanged,” he said.
His comments came in response to a question about whether the Japanese central bank saw a need to adjust the YCC in its rate review later this month.
Under the YCC, the Bank of Japan is targeting short-term interest rates at -0.1% and buying large amounts of government bonds to cap 10-year bond yields at around 0% as part of efforts to bring inflation to its 2% target.
With inflation above the 2% target for more than a year, markets are rife with speculation that the Japanese central bank could adjust the YCC as early as this month to deal with rising costs, such as market distortions, caused by its Huge bond purchases to defend the yield cap.
Sources told Reuters that the Bank of Japan is internally discussing the idea of adjusting the YCC as early as this month, although talks are preliminary and no final decision has been taken.
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