The Bank of Japan did not change its policy rate.

While the Bank of Japan (BoJ) did not change interest rates, it widened the target band for 10-year government bond yields by 25 basis points in order to increase flexibility in yield curve control. After the announced decisions, the Japanese yen strengthened against the dollar. The dollar/yen parity was stabilized at 133.2 after seeing the lowest level in the last 4 months with 133.1.

The decisions taken at the BoJ’s monetary policy meeting, which started yesterday and ended today, were announced. Accordingly, the bank kept the policy rate unchanged at minus 0.1 percent.


The BoJ, which took the aforementioned decision unanimously, stated that it will continue to purchase unlimited amount of government bonds and 12 trillion yen annual exchange-traded funds (ETF) and 180 billion yen annual Japanese real estate investment funds (J-REIT).

The Bank also decided to change the management of the yield curve control to improve market functioning and encourage a smoother formation of the yield curve. Accordingly, the target band for the 10-year Japanese government bond, which was previously plus/minus 25 basis points, was expanded by 25 basis points to plus/minus 50 basis points.

The Bank cited the deterioration in the functioning of the bond markets, in line with the relationship between arbitrage transactions in spot and futures markets and bond rates with different maturities, as the reason for the decision pointing to a change in the fundamentals of ultra-loose monetary policy.

In the text of the resolution, it was stated that the volatility in the foreign financial and capital markets has increased since the spring, and this situation has significantly affected the Japanese markets.



“Japanese government bond yields are reference rates for corporate bond yields, bank lending rates, and other funding rates. If these market conditions continue, this could have a negative impact on financial conditions, such as the issuance conditions of corporate bonds. The Bank expects that it will facilitate the transmission of the effects of monetary expansion within the framework of its control, through corporate financing, etc. By implementing these measures, the Bank will aim to increase the sustainability of monetary expansion and thus achieve its price stability target. It will also increase the number of customers, and it will respond quickly for all maturities by performing fixed-rate purchases.”

In the text, it was stated that the Return Curve Controlled Monetary Expansion policy will continue until the 2 percent inflation target is reached, and it was emphasized that the monetary base will continue to expand until the annual inflation exceeds the 2 percent target and remains above the target.

In the text, “The Bank will closely monitor the impact of the new type of coronavirus (Kovid-19) epidemic and will not hesitate to take additional expansionary measures if necessary. In addition, it is expected that interest rates will remain at the current or lower levels in the short and long term.” It was also noteworthy that the orientation in the form was preserved.

The change in the BOJ’s yield curve target band came at a time when the news flow about the candidates to replace BoJ Chairman Haruhiko Kuroda, whose term of office will expire in April, intensified and how a change in monetary policy would be discussed.

After the announced decisions, the Japanese yen strengthened against the dollar. The dollar/yen parity was stabilized at 133.2 after seeing the lowest level in the last 4 months with 133.1.


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