TOKYO- Japanese households’ weak pent-up demand and companies’ cautious price-setting behavior are likely among factors keeping inflation low, Bank of Japan Deputy Governor Masayoshi Amamiya said on Tuesday.
“Overall demand has been relatively weak in Japan, and demand shifts from services to goods have been somewhat slow,” Amamiya said.
“Japan therefore has not seen a surge in goods prices like the one observed in the United States,” he said in opening remarks at a BOJ-hosted workshop with academics, held to look into structural factors behind the country’s low inflation.
Meanwhile, BOJ kept up its relentless quest to defend a key yield cap by offering to buy unlimited amounts of 10-year government bonds, putting even more downward pressure on the yen and testing its resolve to keep policy ultra-loose.
The move is in line with an announcement the BOJ made on Monday to offer unlimited bond buying from Tuesday to Thursday to keep the 10-year Japanese government bond (JGB) yield from rising above an implicit 0.25 percent cap it sets around its 0 percent target.
Aside from the offer to buy unlimited amount of 10-year JGBs at 0.25 percent, the BOJ may also conduct unscheduled buying operation for super-long bonds if yields for the maturity spike, analysts say.
“With regard to the outright purchases of JGBs…the BOJ may change the schedule and amounts of the purchases as needed, taking account of market conditions,” the BOJ said in Monday’s statement announcing its plan for fixed-rate operations.
Struggling to swim against the tide of rising interest rates globally, the BOJ staunchly defended its 0.25 percent yield cap on Monday with a rare step of offering to buy unlimited sum of 10-year JGBs at 0.25 percent twice in a single day.
The central bank then announced its plan for consecutive interventions that will last until Thursday.
