Bank of Japan discloses a new policy framework, targeting long-term rates

The Bank of Japan disclosed complex changes to its monetary policy framework by simply setting a target for long-term interest rates, though it kept a 0.1% negative rate on certain cash holding, simultaneously rejigging its monetary base target of about ¥80 trillion annually to back its yield aims, the major bank reported on Wednesday at the end of a two-day board gathering.

The new yield curve monetary policy was officially approved in a 7 to 2 vote by the 9-member board. It turned to be the related measure on a revised Japan government bond market operations passed by an 8 to 1 vote with the stated purpose of the changes to raise the monetary base until inflation’s sustained higher than 2%. In other words, Japan’s major financial institution has effectively abandoned a base money target and also replaced it with a so-called yield curve control effort in order to purchase long-term government bonds in an attempt to keep 10-year bond yields around the current levels of 0%, although at a pace of the ¥80 trillion annual level currently utilized.

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