Bank of Japan will consider possibility of changing rates-Nakazora
2022.12.13 13:17
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Bank of Japan will consider possibility of changing rates-Nakazora
Budrigannews.com – Mana Nakazora, chief credit strategist at BNP Paribas (OTC:), believes that the Bank of Japan ought to modify a policy statement so that it has more leeway to adjust interest rates rather than solely focusing on maintaining massive stimulus. Japan, Reuters was told.
Some market participants are considering Nakazora as a candidate to fill one of the two deputy BOJ governor positions that will become available in March of next year. He is also a member of a panel in the trade ministry that is researching the best way to channel funds into green energy.
In an interview on Monday, she said that the government and BOJ should change a 2013 joint statement that says the central bank will use ultra-loose monetary policy to reach its 2% inflation target “at the earliest date possible.”
“The BOJ ought to change the language to give itself more recompense” in changing loan fees as per abroad and homegrown financial turns of events, she said.
According to Nakazora, “It needs to convey that interest rates could move up or down depending on economic developments.” It is essential to convey that the BOJ’s massive monetary easing will end.”
The BOJ maintains a yield curve control (YCC) policy that limits the yield on 10-year bonds to around 0% and keeps short-term interest rates at -0.1%. In addition, it meets the inflation target by purchasing large amounts of risky assets and government bonds.
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Haruhiko Kuroda, Governor of the BOJ, has repeatedly pledged to maintain massive stimulus until inflation sustainably reaches 2%. He has dismissed the possibility of a near-term rate hike.
Markets are rife with speculation that the BOJ may modify YCC and permit further rate increases when Kuroda’s term comes to an end in April of next year. In October, core consumer prices increased by 3.6% from a year earlier, which was the fastest annual rate in 40 years.
The BOJ has kept the 10-year yield close to zero as a result of its aggressive bond buying to defend the cap. However, critics claim that is distorting the curve because yields on other maturities have increased in response to market expectations of a future change in policy.
According to Nakazora, spreads on corporate and municipal bonds are also widening, and markets are beginning to price in the possibility of a change to YCC.
She stated that despite any modification to YCC, Japan’s fragile economy will still result in interest rates significantly lower than those of the United States and Europe.
