BOJ Sticks to Bond Buying Despite Rising Yields!
Despite the recent surge in bond yields, Bank of Japan (BOJ) Deputy Governor Shinichi Uchida has reaffirmed the central bank’s commitment to reducing government bond purchases while maintaining a strong stimulus effect on the economy.
Uchida emphasized that if economic and price developments align with projections, BOJ is prepared to continue raising short-term interest rates. Speaking in parliament, he stated, “Despite some weaknesses, Japan’s economy is recovering moderately, and inflation is gradually accelerating toward our 2% target.”
BOJ’s Rate Hikes and Market Impact
In January, BOJ raised short-term interest rates from 0.25% to 0.5%, continuing its planned reduction in large-scale bond purchases, first announced in July 2023.
Japan’s government bond (JGB) yields have climbed recently as investors anticipate that BOJ could raise rates again and push borrowing costs higher than initially expected.
Despite this, Uchida reaffirmed BOJ’s stance, stating, “Our position on short-term policy rates and bond operations remains unchanged. The movement in yields reflects market sentiment on economic and price outlooks, as well as global developments.” He added that BOJ’s massive bond holdings continue to exert a strong monetary easing effect on the economy.
