© Thomson Reuters PHOTO: Bank of Japan Governor Haruhiko Kuroda at a press conference in Tokyo
(Reuters) – The Bank of Japan kept interest rates very low on Wednesday, including a tight cap on bond yields, defying market expectations that it will scale back a massive stimulus program as inflationary pressures mount.
The surprise move sent the yen lower against other currencies as investors shed their bets in anticipation of the central bank revising its yield control policy.
At its two-day meeting, the BOJ unanimously maintained its yield curve (YCC) control target set at -0.1% for the short-term interest rate and around 0% for the 10-year yield.
Below is an excerpt from Bank of Japan Governor Haruhiko Kuroda's remarks at his post-meeting press conference in Japanese, translated by Reuters:
General consumer inflation
"" We expect core consumer inflation to slow below 2% through the second half of fiscal 2023. Looking at inflation trends, we are likely to see inflation gradually accelerate towards our target price due to an improvement in the widening of the output gap in the context of inflation expectations and long-term, duration and wage growth. But we still don't see the inflationary outlook to meet our price target in a sustained and sustainable manner."
© Thomson Reuters People walk past the headquarters of the Bank of Japan in Tokyo
FOLLOW A SUPER SIMPLE POLICY
"Uncertainty about the Japanese economy is very high. We need to support the economy with our stimulus policies so that companies can raise wages. By maintaining an ultra-light policy, we will strive to achieve our target prices consistently and sustainably through wage increases. "
ON EXPANDING THE RATING CIRCLE
"We don't need to expand our reach around our profit target…"
"Not so long ago, we decided on our measures in December. It will probably take more time for these measures to start having an impact on improving the functioning of the market in the future."
"Thus, YCC tends to be persistent."
ECONOMIC GROWTH
“Japan's economy is likely to grow above its potential for three consecutive years. This means that wages and prices will be driven by strong demand… On the other hand, upward pressure on imports will gradually fade, affecting price movements.
ADVANCED FINANCING OF OPERATION BOY
“This move will allow us to lower long-term interest rates without directly affecting the supply and demand of the JGB cash market. We want to use this tool for different metrics and in different ways.”
EXCELLENT RATE FOR TRANSACTIONS WITH ADVANCED FACILITIES
"We do not exclude the introduction of negative tariffs."
IS IT POSSIBLE TO ELIMINATE DIFFERENTIAL RATES BEFORE NET INFLATION REACHES THE 2% TARGET?
“We have guidance that promises to keep interest rates at or below current levels. That's enough."
IS ENHANCED FUNDING THE NEW FOG FOR YCC?
"This scheme was implemented as a monetary policy tool. The extended operation was effective. We have extended this tool. But I don't think our decision shows that the YCC has reached its limits. yield curve.
MASSIVE INCREASE IN BOND BUYING TO MAINTAIN QUALIFICATION LIMIT
"I don't see much of a problem with the BOJ increasing its bond purchases."
SEE PAYMENTS
"Unlike before, we expect a slight increase in wages, if we listen to the feedback of business leaders and trade unions. Winter premiums are up and corporate profits are at record levels… Wage growth is accelerating, something we haven't seen in the past… So we're not 100% sure that wages will go up.''
(Reporting by Leika Kihari; Editing by Rashmi Aich)
