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At its economic policy meeting held today, the Bank of Japan Policy Board decided to modify the curve control in order to improve market function and also promote smoother formation of the yield curve. Since early spring 2022, volatility in domestic financial and capital markets has increased, significantly affecting the market.
The functioning of the bond market has deteriorated, especially in terms of the relative relationship between interest rates with different maturity costs and the relative relationship between the spot and futures markets. JGB yields are the reference rate for corporate bond yields, interest-bearing loans, and funding rates. If market conditions persist, this could have a negative impact on financial conditions.
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The Bank of Japan expects the measures decided today to facilitate monetary policy easing and the resulting effects under the yield curve control framework. The Bank continues to strive to achieve the price stability target by further increasing monetary easing.Japanese Yen Eyes Support After Fed Fails to Reassure Markets
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The next monetary policy content is to set guidelines for market operations and asset purchases. The Bank of Japan applies an interest rate of -0.1% to the interest rate on current account balances held by Bank financial institutions. On short-term interest rates, the Bank makes a policy by purchasing the required amount of JGB without limit so that the 10-year JGB yield remains around 0%.The bank will also purchase exchange-traded funds (ETFs) and J-Trust real estate investment funds as needed with limits of 12 trillion yen and 180 billion yen, respectively. Each limit is at the annual rate of increase in their outstanding amounts. As spending revenues gradually increase, the Japanese economy is expected to continue to grow at a pace above the growth rate. The year-on-year rate of change in CPI is likely to increase as the year-end festivities approach due to higher prices of energy, food and durable goods.
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The Bank will also continue QQE with yield curve control that aims to achieve a price stability target of 2 percentage points for the time needed to maintain the target. This will continue to expand the monetary base to the level of CPI increases that are consistently observed year-on-year. In the meantime, while monitoring the impact of Covid-19, the Bank of Japan is supporting financing, especially in the corporate environment, and maintaining financial market stability.If necessary, the Bank will not hesitate to take additional easing policy steps, the bank also expects the long-term and short-term policy interests of rates to remain at their current levels. Above is daily information on the latest BoJ monetary policy. Continue to update other latest information through the GIC journal which will be announced every day. You can also trade Forex on the GICTrade application with its latest feature, an ECN account, enjoy the advantages of the latest features with the lowest spread starting from 0!
