BANK OF JAPAN POLICY TWEAKS STRENGTHEN MONETARY EASING
A set of tweaks by the Bank of Japan (BOJ) designed to make monetary easing effective and sustainable could be a harbinger of a measured, longer-term shift toward tapering, analysts say, Noriyuki Suzuki and Xu Sincheng reported for Kyodo News.
After a much-hyped review of its tool kit, designed to strike a balance between the benefits and side-effects of prolonged loose monetary policy, the BOJ explicitly said Friday it will allow long-term interest rates to fluctuate in a wider band.
The bank also removed a 6 trillion yen ($55 billion) annual target for buying exchange-traded funds while maintaining a ceiling of 12 trillion yen.
The program called "yield curve control" has been in place since 2016 to keep short-term interest rates at minus 0.1 percent while guiding 10-year Japanese government bond yields around zero percent. After the review, the BOJ said the yields can move up or down about 0.25 percentage point from zero, slightly wider than 0.2 percent either side, previously.
These changes are interpreted as a natural course of events and analysts say financial markets will likely take them in stride. The BOJ has faced growing criticism of its huge presence in both bond and stock markets under the name of supporting the economy and accelerating inflation toward its elusive 2 percent target.
Still, only hours after the BOJ announced the findings of the review at a two-day policy meeting, Governor Haruhiko Kuroda made comments that appear confusing to market players: The bank is not widening the band for long-term interest rates and it will not trim exchange-traded funds (ETF) buying.
"I don't take Mr. Kuroda's remarks at face value," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. "The findings of the review reflect that the BOJ is struggling."