Bank of Japan : Shifting policy framework to targeting yield curve

 

The Bank of Japan shifted the focus of its monetary stimulus program Wednesday, seeking  flexibility to manage its side effects while strengthening its commitment to stoking inflation over the longer term. The central bank said it would move away from a rigid target for expanding the money supply, while seeking to control bond yields across different maturities. The BOJ said its target for expanding the monetary base through asset purchases, previously set at 80 trillion yen ($780 billion) annually, may now fluctuate in the short term to enable policy makers to control bond yields.

The BOJ also scrapped a target for the average maturity of its government bond holdings. Both moves will help the central bank manage the impact of lower long-term yields on Japanese banks. Governor Haruhiko Kuroda and the policy board kept the interest rate on a share of bank reserves unchanged at minus 0.1%.  This move basically means the BOJ has shifted its main policy target to the yield curve from the monetary base. If it takes additional easing in the future, it will probably deepen the negative rate.  

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Source: Bank of Japan


 

Japan’s Nikkei Stock Average jumped after the Bank of Japan kept a key rate unchanged and announced it would introduce a 10-year interest-rate target in a bid to fuel inflation.  Japan bank stocks rallied. The Topix’s banking subsector was last up 6.7%  

Mitsubishi UFJ Financial Group rising 7.2%,

Mizuho FG Financial Group  up 6.7%

 Sumitomo Mitsui Financial Group climbing 7.1%.

 

The Chinese steel sector surged early Wednesday, after Baoshan Iron & Steel said yesterday that it will absorb Wuhan Iron & Steel via an equity swap, boosting the steel sector 1.2% higher Wednesday morning. The benchmark Shanghai Composite Index  was up 0.1% at 3,026.14 and the Shenzhen Composite Index gained 0.2%.

 

Looking ahead, investors will be shifting their focus to a press conference by BOJ Governor Haruhiko Kuroda in the Asian afternoon and the U.S. Federal Reserve’s statement on policy due later in the global trading day.


 

 

J. Mason ♦ 

 

 

 

 

 

 

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