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Japan must prepare for eventual end to BOJ's yield cap, says MOF executive

Thursday, August 4, 2022
Japan must prepare for eventual end to BOJ's yield cap, says MOF executive © Reuters. FILE PHOTO: A man wearing a protective mask walks past the headquarters of the Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo/File Photo

By Leika Kihara and Takaya Yamaguchi

TOKYO (Reuters) - Japan must prepare for the time the central bank abandons its 0% cap on long-term interest rates and when private investors become the dominant player in the government bond market, said a finance ministry executive overseeing debt issuance.

While the Bank of Japan's (BOJ) massive bond buying may be reducing market liquidity, it has not caused any disruption to the government's fund raising, said Michio Saito, who heads the ministry's division charged with issuing Japanese government bonds (JGBs).

"It's a comfortable situation for us in that we are able to stably issue JGBs at low interest rates, thanks in part to the effect of the BOJ's monetary policy," Saito told Reuters in an interview on Thursday.

"But we must bear in mind the BOJ's current policy won't last forever. Sometime in the future, it won't buy as much bonds as it does now, and will no longer peg interest rates at a set level," he said.

The Ministry of Finance (MOF) must prepare for the time the central bank modifies ultra-low rates, such as by taking steps to enhance liquidity in the JGB market, said Saito, who became director-general of the ministry's financial bureau in June.

Saito, known as "Mr. JGB" for his expertise in the market, said his division will work on developing market infrastructure for when private investors replace the BOJ as a major player in the JGB market.

The remarks highlight how Japanese policymakers are quietly laying the groundwork for when the BOJ withdraws its massive stimulus, as its counterparts across the globe tighten monetary policy to deal with soaring inflation.

"We're working closely with the BOJ to ensure the JGB market's function does not deteriorate too much," Saito said.

Under its yield curve control (YCC) policy, the BOJ caps the 10-year yield around 0% and offers to buy unlimited amount of JGBs to defend an implicit 0.25% cap around the target.

BOJ Governor Haruhiko Kuroda has repeatedly brushed aside the chance of a near-term exit from ultra-low rates, stressing the need to focus on supporting a fragile economic recovery.

But deputy governor Masayoshi Amamiya, considered a strong candidate to succeed Kuroda when his term ends next April, has said the BOJ must always think about the appropriate means for exiting ultra-easy policy.

After years of massive buying to fire up inflation to its 2% target, the BOJ now owns half of outstanding JGBs in the market.

Mounting upward pressure on yields forced the BOJ to buy a record monthly amount of JGBs in June to defend its yield cap, rolling back years of efforts to taper its huge buying and drawing criticism from investors for distorting market pricing.

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17-08-2022 23:09:25 (UTC+7)

EUR/USD

1.0165

-0.0004 (-0.04%)

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↑ Sell

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EUR/USD

1.0165

-0.0004 (-0.04%)

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GBP/USD

1.2037

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USD/JPY

135.45

+1.24 (+0.92%)

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AUD/USD

0.6918

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USD/CAD

1.2927

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EUR/JPY

137.68

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EUR/CHF

0.9696

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Gold Futures

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Silver Futures

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Copper Futures

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Crude Oil WTI Futures

87.03

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92.72

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US Coffee C Futures

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Euro Stoxx 50

3,756.06

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S&P 500

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DAX

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FTSE 100

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Hang Seng

19,922.45

+91.93 (+0.46%)

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US Small Cap 2000

1,976.30

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BASF SE NA O.N.

42.685

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53.37

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Allianz SE VNA O.N.

177.54

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Adidas AG

169.10

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Deutsche Lufthansa AG

6.467

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Siemens AG Class N

108.64

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8.856

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 EUR/USD1.0165↑ Sell
 GBP/USD1.2037Neutral
 USD/JPY135.45↑ Buy
 AUD/USD0.6918Buy
 USD/CAD1.2927↑ Sell
 EUR/JPY137.68↑ Buy
 EUR/CHF0.9696↑ Buy
 Gold1,775.55Sell
 Silver19.660Neutral
 Copper3.5830↑ Buy
 Crude Oil WTI87.03↑ Buy
 Brent Oil92.72↑ Buy
 Natural Gas9.213↑ Sell
 US Coffee C218.15↑ Sell
 Euro Stoxx 503,756.06Sell
 S&P 5004,261.46↑ Buy
 DAX13,626.71Sell
 FTSE 1007,515.75Neutral
 Hang Seng19,922.45Neutral
 Small Cap 20001,976.30↑ Buy
 IBEX 358,434.80Neutral
 BASF42.685Neutral
 Bayer53.37Neutral
 Allianz177.54Buy
 Adidas169.10↑ Sell
 Lufthansa6.467↑ Sell
 Siemens AG108.64↑ Sell
 Deutsche Bank AG8.856Neutral
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SJC Eximbank6,600/ 6,700
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Cập nhật 17-08-2022 23:09:28
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ↀ Giá vàng thế giới
$1,761.60-14.08-0.79%
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Sản phẩmVùng 1Vùng 2
RON 95-V25.34025.840
RON 95-III24.66025.150
E5 RON 92-II23.72024.190
DO 0.05S22.90023.350
DO 0,001S-V24.88025.370
Dầu hỏa 2-K23.32023.780
ↂ Giá dầu thô thế giới
WTI$86.49+0.120.14%
Brent$92.00+0.40.44%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD23.235,0023.545,00
EUR23.186,9924.485,46
GBP27.597,2628.774,17
JPY169,51179,46
KRW15,4518,83
Cập nhật lúc 18:50:59 17/08/2022
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