TOKYO – The Bank of Japan will review the side effects of its monetary easing at next week’s policy meetings and may take additional steps to correct distortions in the yield curve, the Yomiuri newspaper reported on Thursday.
The BOJ stunned markets last month by widening the band around its 10-year bond yield target, a move that allowed the yield to rise by up to 0.50 percent from the previous cap of 0.25 percent.
But the move has failed to address distortions caused in the bond market from the BOJ’s massive bond buying, heightening market speculation, analysts say. The central bank will take additional steps as early as its policy meeting next week.
At next week’s meeting, the BOJ’s nine-member board will debate the side-effects of its yield curve control (YCC) policy and bond market moves since the December decision, the Yomiuri said.
It will also scrutinize whether the BOJ can correct market distortions through adjustments in the amount of bonds it buys, and will take additional policy tweaks if needed, the paper said without citing sources.
The dollar extended its decline against the yen after the report, briefly falling 0.42 percent to 131.95.
Japan’s economic output recovered to near its full capacity for the first time in nearly three years, data showed, a sign the world’s third-largest economy could be finally pulling out of a prolonged, coronavirus pandemic-induced slump.
The data adds to recent signs that Japan’s economic recovery will help inflation stay around the central bank’s 2 percent target, and could underpin market expectations of a further tweak to its ultra-loose policy, analysts say.
Japan’s output gap, which measures the difference between an economy’s actual and potential output, stood at -0.06 percent in the third quarter of last year, narrowing its decline for the fourth straight quarter, an estimate by the Bank of Japan (BOJ) showed.
It was the smallest drop since Japan’s output gap turned negative in April-June 2020, when the outbreak of the pandemic began jolting the global economy, the estimate showed. — Reuters
