BOJ keeps negative rates, tweaks YCC language amid higher inflation
Investing.com-- The Bank of Japan held interest rates at ultra-low levels on Tuesday and slightly altered the rhetoric around its yield curve control (YCC) policy, while also forecasting higher inflation levels in the coming years.
The BOJ left its short-term interest rate at -0.1%, and said it will use the upper end of its YCC band- 1% as a reference cap for its market operations. The move reflects a slight change in the BOJ's messaging around its otherwise strict YCC policy, and could reflect some more flexibility.
«With extremely high uncertainties surrounding economies and financial markets at home and abroad, it is appropriate for the bank to increase the flexibility in the conduct of yield curve control,» the BOJ said in a statement.
The bank currently allows 10-year yields to move in a range of -1% to 1%, as part of its YCC policy, and left that rate unchanged.
The BOJ also said it will continue with its current pace of asset purchases and quantitative easing to stimulate the economy, citing continued uncertainty over higher inflation and worsening global economic conditions.
The move comes as the bank struggles to maintain a balance between supporting the Japanese economy, stemming further weakness in the yen while also grappling with stickier inflation levels.
The yen slid 0.5% after the BOJ decision, briefly retaking the 150 level against the dollar as the decision disappointed market participants hoping for a more hawkish move. Benchmark 10-year yields on Japanese government bonds trimmed some gains after the decision, moving further below the 1% ceiling.
The BOJ said it expects core consumer inflation (which excludes fresh food) to remain above its 2% target through fiscal 2024, and that risks to prices
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