A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022. REUTERS/Florence Lo/Illustration
At its meeting, the central bank maintained its yield targets, set around 0% for 10-year tenors and made no change to its policy allowing trade to fluctuate 50 basis points either side of that, even though the market had begun testing that limit right after it was implemented last month. That’s why some investors expected the BOJ would offer yet another adjustment by perhaps widening the band to 0.75%.
The BOJ’s policy stubbornness reflects intractable realities. Whatever Kuroda does, it hurts, including doing nothing. The real Japanese economy is in rocky shape and inflation data is muddy. In that context, policymakers have cause to await spring wage negotiations – and perhaps Kuroda’s retirement in April - before concluding that a sustained demand-driven price rise is underway and sufficient to justify higher rates.
The central bank also made no change to its guidance that allows the 10-year bond yield to fluctuate 50 basis points either side of its 0% target.