The Bank of Japan just shocked markets with a policy tweak — here's why it matters
Publishing timestamp: 2023-07-28 22:55:56
Summary
The Bank of Japan has announced "greater flexibility" in its monetary policy, specifically in its yield curve control. This unexpected move has left markets wondering if it signals a change in policy stance. The central bank will allow more fluctuation in yields beyond its target range and will purchase 10-year Japanese government bonds at 1% through fixed-rate operations. The move is seen as an attempt to enhance the sustainability of the current easing framework and address inflationary pressures. However, some experts argue that the yield curve control policy should be retired, as it distorts market functioning and has contributed to the yen reaching its lowest level since the 1970s. The Bank of Japan's move is seen as a gradual shift away from yield curve control while maintaining a supportive monetary policy.
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