In a landmark decision that marks a significant shift in Japan’s monetary policy, BoJ announced the termination of its Yield Curve Control framework and negative interest rate policy, signifying that these measures “have fulfilled their roles.”
This pivotal move is underpinned by BoJ’s assessment that a “virtuous cycle between wages and prices” has come in sight and that the long-standing 2% inflation target is on track to be “achieved in a sustainable and stable manner.”
Setting the overnight call rate to a range of 0-0.1%, the decision was reached with a majority vote of 7-2.
BoJ will continue its purchase of JGBs at “broadly the same amount as before,” ensuring a measure of stability in the bond market. This part of the decision was made with an 8-1 vote. Meanwhile, BoJ has pledged to “respond nimbly” in the event of a rapid rise in long-term interest rates
Additionally, BoJ has outlined plans to discontinue the purchase of ETFs and J-REITs, while the procurement of commercial paper and corporate bonds will be gradually reduced, aiming for discontinuation within approximately one year.
