BoJ decided today to purchase JGBs to and T-bills “without setting an upper-limit” to keep 10-year JGB yields at around zero percent. Governor Haruhiko Kuroda said in the post meeting conference, “by removing the bond-buying guidance, we clarified our intention to buy government bonds aggressively without setting a limit.”
“We will buy as many government bonds as necessary under YCC (yield curve control),” he said. “We’re buying government bonds as part of our monetary policy steps. But our measures and fiscal stimulus will also have a mutually reinforcing impact.” But he emphasized “we aren’t monetizing government debt.”
On future policy changes, he emphasized “we won’t hesitate to take additional monetary easing steps if needed. As for future policy options, we can expand the size of our asset buying or market operations, as well as cut interest rates. We will choose the most appropriate option at the time. We won’t rule out interest rate cuts as a policy option.”
On inflation, he said “I don’t think there’s a risk Japan will revert to deflation. But short-term inflation expectations are falling quite a bit, and those for the long term are also falling somewhat. This needs to be watched carefully.”
