Japan's economy is not yet in a phase where the central bank can end yield curve control (YCC), its board member Hajime Takata was quoted as saying by the Nikkei daily, brushing aside the chance of a near-term exit from ultra-loose monetary policy.
Under YCC, the Bank of Japan sets a -0.1% target for short-term interest rates and caps the 10-year bond yield around 0% to achieve its 2% inflation target in a sustainable manner.
Markets are simmering with speculation the BOJ could remove the 10-year yield cap to address the mounting cost of prolonged easing, such as the distortions its huge bond buying is causing in the shape of the yield curve. "Unfortunately, I don't think Japan is in that phase yet," Takata told the Nikkei in an interview published on Saturday, on whether the central bank could ditch YCC.
The remarks echo those of BOJ Governor Haruhiko Kuroda, who has repeatedly stressed the need to maintain ultra-loose monetary policy to support an economy still recovering from the coronavirus pandemic's scar. While it wasn't easy to sustainably achieve the BOJ's 2% inflation target, there were some positive signs in corporate capital expenditure and wages, Takata was quoted as saying.
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