The Bank of Japan will likely insert clearer guidance in its policy statement on what it sees as an acceptable level of fluctuation in long-term interest rates, sources said, in an effort to show it won’t tolerate rises that hurt the economy.
The move would be part of the BOJ’s review of its policy tools next week, which aims to make its stimulus programme more sustainable as the coronavirus pandemic pushes inflation further away from the bank’s 2% target.
While there is no consensus within the BOJ, the guidance may take the form of a loose range around its 0% target for 10-year bond yields, said three sources familiar with its thinking.
The key message would be similar to recent comments by BOJ Deputy Governor Masayoshi Amamiya that yields should be allowed to move more “as long as it does not diminish the effect of monetary easing,” they said.
(Reporting by Leika Kihara; Additional reporting by Takahiko Wada; Editing by Catherine Evans)