TOKYO (Reuters) – The Bank of Japan is expected to maintain its monetary policy status quo at its monetary policy meeting on June 9-10. The fluctuation range of the 10-year government bond interest rate is also likely to remain unchanged at 0.5%. Although the distortion of the yield curve has not been resolved, the BOJ is expected to continue to conduct flexible market operations while also utilizing shared collateral operations and assess the effects of the series of measures.
The Bank of Japan announced in December last year that the interest rate for 10-year bonds was relatively low on the yield curve, making it difficult to see the appropriate level of interest rates. The 10-year interest rate fluctuation range was expanded from plus or minus 0.25% to plus or minus 0.5%.
However, the 10-year interest rate remains depressed on the yield curve. In the bond market survey February survey released on the 1st, the market functioning DI was the lowest since the survey began in February 2015.
At a press conference on Feb. 22, Naoki Tamura, a member of the Deliberative Council, said, “It is true that the decline in functioning (of the bond market) has not been resolved,” even after the widening range of fluctuations in long-term interest rates last December. Stated. On the other hand, the Bank of Japan has a prominent view that it will take more time for the yield curve to take on an appropriate shape and market functioning to improve. At a press conference on the 2nd, Councilor Hajime Takada said that it would take a considerable amount of time to establish an appropriate interest rate.
As for the yield curve, the short- to medium-term yield curve has stabilized due to the 5-year common collateral operation and the decline in speculation that the Bank of Japan will abolish negative interest rates.
The Bank of Japan decided in January to expand its joint collateral operations. In February, in connection with the supplementary supply of government bonds, the BOJ announced an increase in the minimum lending fee for some of the current issues of 10-year government bonds. The aim is to curb short-selling mainly by overseas speculators. We will continue to monitor the effects of the series of measures while devising operational management.
This decision-making meeting will be the last meeting during President Haruhiko Kuroda’s term of office. Although speculation about policy revisions is smoldering in the market, there are persistent voices at the BOJ that it is not appropriate to revise policies when there are no major changes in the outlook for the economy and prices compared to the time of the last meeting in January. It is still necessary to assess corporate wage increases, which the Bank of Japan sees as the key to achieving its price target.
Before the end of the fiscal year in March, there are many who want to avoid the Bank of Japan’s policy revisions becoming a factor in market turmoil, and it is likely that the interest rate fluctuation range will not be expanded again and the yield curve control (YCC) will be abolished. is large.
(Takahiko Wada, Reika Kihara Editing: Hitoshi Ishida)
