BoJ’s Noguchi: Recent rise in long-term rates likely won't have impact on our new bond taper plan
Bank of Japan (BoJ) board member Asahi Noguchi said on Thursday that the “recent rise in long-term rates likely won't have an impact on our new bond taper plan to be decided in June.”
Key quotes
Most important thing is that things are different now than during period when we had YCC.
We don't look at the size of our JGB buying from standpoint of monetary policy.
In tapering bond buying, giving market predictability, while maintaining flexibility, is most important.
Whether to maintain current pace of bond taper beyond April 2026 will be something to be discussed leading up to the next policy meeting.
Recent rise in super-long bond yields likely driven by global trend in yields, they are rapid but not necessarily abnormal.
Don't think it's appropriate to recklessly intervene to correct bond yield moves.
Cloud of uncertainty clearing somewhat in US-China trade tension.
Markets restoring some calm, though uncertainty surrounding US tariff policy and impact on Japan's economy high.
BoJ shouldn't move on rates when there is lack of clarity on economic outlook.
Market reaction
The USD/JPY pair is keeping its range near 143.30, as of writing, down 0.24% on the day.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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