Governor Kuroda, Long- and Short-Term Interest Rate Manipulation and Asset Purchase Inspection: “More Effective Mitigation” – Bloomberg

12/18/2020 Japan



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Tohiko Kuroda, Governor of the Bank of Japan, said on the 18th after the monetary policy decision meetingRegarding the inspection of policies from the point of view of achieving the announced price stability objective of 2%, it was revealed that the objective will be quantitative and qualitative monetary easing (yield curve control, YCC) with manipulation long and short term interest rates and asset purchases.

BBG

At the meeting, Governor Kuroda said: “I have no intention of finding or weakening the way out of monetary easing. I would like to conduct inspections that allow for more effective monetary easing.”

It also said it would not review the 2% price stability target and negative interest rate policy. It also denied having shortened the maturity of long-term interest rate targets and said it would not review the overshoot commitments.

The introduction of new media depends on the result of the inspection. The results are published in anticipation of the March meeting. It is not necessary to change the quantitative and qualitative monetary easing framework with manipulation of long and short-term interest rates.

Main observations
  • Shorten the maturity of the target long-term interest rate, without particular consideration
  • ETF sale is one of the exit discussions, premature and not considered
  • It does not mean that the framework is reviewed like policy inspection and general verification.
  • The current policy framework works even in Corona, not bad
  • You don’t have to think that the current exchange rate has a significant impact on the economy.
  • Continue supporting the economy with strong monetary relaxation
  • I don’t think there is a low risk of falling into deflation.
  • A special corporate financing program is needed at the moment

At the meeting, the monetary policy management policy maintained the status quo. The deadline for the new corona virus response program to support corporate financing will be extended for six months until the end of September 2021, and will be extended again if necessary.

The 2% target price was introduced in January 2013. Governor Kuroda has expanded the monetary easing measures with the aim of achieving early realization. However, due to the influence of Corona, prices are currently in negative territory.

Masamichi Adachi, chief economist at UBS Securities, said the policy inspections “can be seen as a tightening just because of the inspections.” When issued together with the extension of the new corona support program that strengthens mitigation, it can be said that it is “positive in the sense that it has avoided the image of excessive hardening and normalization and has prevented the market from making strange speculations.” He said it would be.

Key points from the decision meeting
  • Defer the policy interest rate to -0.1%
  • The 10-year government debt interest rate target remains unchanged at around 0%.
  • Maintaining long and short-term interest rate operations is for and against 1
  • Maintain the status quo of the ETF / REIT purchase policy
  • Extend the term for the purchase of corporate bonds / CP
  • Corona-compliant operations have removed the upper limit of 100 billion yen per financial institution

(Add President Kuroda’s statements during the meeting)

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