BOJ’s Amamiya says c.bank tends to buy bonds if yields rise rapidly
KYOTO, Japan (Reuters) – Bank of Japan Deputy Governor Masayoshi Amamiya said on Thursday the central bank will purchase government bonds "promptly and appropriately" if yields rise rapidly.
His comments came as Japanese bond yields hit a 1-1/2-year high on Thursday with investors continuing to examine the limits within the central bank's new commitment announced two days ago to let debt markets to advance more freely.
Amamiya said even though the central bank is aware of the possible demerits of the company’s massive stimulus program, it would not reduce monetary support even though it truly is taking longer for inflation to hit its 2 percent target.
"There is an evergrowing concern in the government bond market that market functions are actually deteriorating," Amamiya said, explaining why the BOJ made the revolutionary commitment on Tuesday.
"Though the target amount of long-term yields remains at approximately zero percent," he told a speech to business leaders in Kyoto, western Japan.
"The BOJ is not going to expect the amount of yields to ratchet up," he explained, adding how the bank will step up to curb any sharp surge in yields when needed.
Under a yield curve control (YCC) program, the BOJ guides short-term rates at minus 0.1 percent plus the 10-year government bond yield around 0 %.
The BOJ kept its yield targets steady on Tuesday but said it will permit long-term rates to transfer more flexibly. It also made tweaks to cut back unwanted side effects of the company’s policies on markets and commercial banks, reflecting its view that its inflation target remains stubbornly not even considered.
Amamiya conceded that inflation will miss the BOJ's target for another 36 months given Japan's sticky deflationary mindset. But he stressed which the economy was sustaining momentum for price growth to accelerate toward 2 percent.
He said the best approach for your BOJ were to maintain its ultra-loose policy, while making tweaks for your program to tend the prices of prolonged easing.
"The consequences of our own monetary easing are strengthened as a whole, concerning sustainability," he said of Tuesday's measures.
Amamiya said the BOJ was mindful that by continuing to its ultra-easy policy, it had become hurting financial institutions' profits which these costs were cumulative.
"There isn’t any alteration to the BOJ's goal thoroughly examining risks considered best for the conduct of monetary policy," Amamiya said.