Japan's central bank retains key interest rate while fine-tuning bond purchases for more flexibility
Japan's central bank has opted to keep its benchmark interest rate at minus 0.1% but has fine-tuned its bond purchases to allow greater flexibility in its policies
TOKYO — Japan’s central bank opted Friday to keep its benchmark interest rate at minus 0.1% but fine-tuned its bond purchases to allow greater flexibility in its policies given the “high uncertainties” facing the world's third-largest economy.
The Bank of Japan said it needed a nimbler approach to keep financial markets stable as it works toward a goal of keeping inflation near 2%, the level it says is needed for sustained economic growth. The bank's governor, Kazuo Ueda, said the move was a not a step toward giving up its ultra-lax monetary policy.
The BOJ said it would offer to buy 10-year Japanese government bonds at 1% each business day. It also said 0.5% upper and lower limits on its yield, which were imposed under the bank's “yield curve control program” would be handled more flexibly.
After the BOJ's announcement, the yield on the 10-year government bond surged to 0.575%, but ended the day at 0.55%. The yield on the 10-year U.S. Treasury rose to nearly 4.04% before it fell back to 3.98% early Friday U.S. time.
The aim of the Bank of Japan's ultra-lax monetary policy is still to keep long-term interest rates near zero. For many years it has kept rates low. For the past decade, it has also used massive asset purchases to keep credit cheap to try to spur investment and spending and prop up economic growth.
As the Federal Reserve and other major central banks have raised interest rates to slow lending and curb inflation, the BOJ has felt pressure to adjust that stance. Japan's inflation rate has lagged behind the torrid price increases seen last year
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