TOKYO. – The Bank of Japan strengthened its commitment to keep interest rates ultra-low by vowing to buy unlimited amounts of bonds daily to defend its yield target, triggering a fresh sell-off in the yen and sending government bonds rallying.
Reinforcing its resolve to support a fragile economy even as sharp rises in raw material costs push up inflation, the BOJ maintained its ultra-loose monetary policy and a pledge to keep interest rates at “present or lower levels.”
It also said it would buy unlimited amounts of 10-year government bonds to defend an implicit 0.25 percent cap around its zero yield target every market day, instead of on an ad-hoc basis.
The BOJ’s commitment to its zero-rate programme puts it at odds with other major economies that are shifting toward tighter monetary policy to combat surging prices, although inflation in Japan is expected to creep up towards the central bank’s 2 percent target.
“The key announcement is the commitment to conducting fixed-rate operations every day,” said Bart Wakabayashi, co-branch manager at State Street Bank in Tokyo. – Reuters
