TOKYO – Japan’s economy is not yet in a phase where the central bank can end yield curve control (YCC), its board member Hajime Takata was quoted as saying by the Nikkei daily, brushing aside the chance of a near-term exit from ultra-loose monetary policy.
Under YCC, the Bank of Japan (BOJ) sets a -0.1 percent target for short-term interest rates and caps the 10-year bond yield around 0 percent to achieve its 2 percent inflation target in a sustainable manner.
Markets are simmering with speculation the BOJ could remove the 10-year yield cap to address the mounting cost of prolonged easing, such as the distortions its huge bond buying is causing in the shape of the yield curve.
“Unfortunately, I don’t think Japan is in that phase yet,” Takata told the Nikkei in an interview published on Saturday, on whether the central bank could ditch YCC.
The remarks echo those of BOJ Governor Haruhiko Kuroda, who has repeatedly stressed the need to maintain ultra-loose monetary policy to support an economy still recovering from the coronavirus pandemic’s scar.
While it wasn’t easy to sustainably achieve the BOJ’s 2 percent inflation target, there were some positive signs in corporate capital expenditure and wages, Takata was quoted as saying.
Japan’s core consumer inflation accelerated to a 40-year high in October, driven by currency weakness and imported cost pressures that the central bank shrugs off as it sticks to a policy of ultra-low interest rates.
The nationwide core consumer price index (CPI) was up 3.6 percent on a year earlier, exceeding the 3.5 percent rise expected by economists and the 3.0 percent gain seen in September.
It was the largest jump since February 1982, when a Middle East crisis stemming from the Iran-Iraq war disrupted crude oil supply and triggered a spike in energy prices.
The rise in the index, which excludes volatile fresh food prices but includes oil products, confirmed that inflation remained above the 2 percent goal of the Bank of Japan (BOJ) for a seventh consecutive month. – Reuters
