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Title: BOJ rules out widening yield band to stem yen fall


M

ay 10, 2022 05:17AM ET


By: AnalysisWatch


The Bank of Japan has no plans to move long-term interest rates further around the 0% target to halt the yen's steep fall, a central bank official said on Tuesday, arguing that such a move would be tantamount to a rate hike.


The BOJ is currently offering to buy an unlimited amount of 10-year Japanese government bonds (JGBs) to protect the implied 0.25 percent ceiling around the 0 percent interest rate target, keeping the policy dovish as part of efforts to stimulate the economy.


However, the sharp fall in the yen as other economies prepare for rate hikes has led to market speculation that the BOJ will widen the 50 basis point spread and tolerate further hikes in long-term rates.


The comments underscore the BOJ's determination to maintain its massive stimulus program and ultra-low interest rates, which could further weaken the yen.


The yen fell to a new 20-year low of 131.34 against the dollar on Monday, before recovering to around 130.10 on Tuesday, as BOJ policy bucks the global trend of tightening monetary policy. Central banks in the US, UK and Australia raised interest rates last week.


Asked in parliament whether Japan could intervene in the currency market to halt the yen's fall, he declined to comment.


The G7 agreed that exchange rates should be set by the markets, that disorderly movements can damage economies and that countries should consult on their actions in the currency market.


The weak yen, once hailed as a boost to exports, is now worrying Japanese policymakers as imports of fuel and raw materials drive up already rising costs.


But despite lawmakers' complaints, Haruhiko Kuroda, the central bank governor, has stressed that the weak yen is good for the economy and will not lead to an interest rate hike.

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