In the Summary of Opinions at BoJ’s December 19-20 meeting, several members noted that Japan is currently in a “critical phase” in achieving 2% inflation target. One noted that “signs of a virtuous cycle have started to be seen” between wages and prices”. This is “evidenced by the overall high levels of corporate profits and moves to increase wages amid tight labor market conditions.”
But “price stability is not considered to have been achieved”. Thus, it’s appropriate for BoJ to continue with the Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control for as long as necessary, to “firmly support the economy and realize a favorable environment for firms to raise wages.
Many members noted the “deterioration in the functioning of bond markets”, and “distortion in the price formation of 10-year bonds”. Expansion of the range of 10-year JGB yield fluctuation will address the deterioration and distortion. But it’s “not intended to change the direction of monetary easing”. The expansion will “contribute to enhancing the sustainability of yield curve control”.
