TOKYO : New Bank of Japan Governor Kazuo Ueda's main challenge will be to phase out yield curve control (YCC), which has come under criticism for distorting markets by keeping long-term interest rates from rising.Under YCC, the BOJ targets short-term interest rates at -0.1 per cent and the 10-year governm
TOKYO : New Bank of Japan Governor Kazuo Ueda's main challenge will be to phase out yield curve control , which has come under criticism for distorting markets by keeping long-term interest rates from rising.
The idea was to control the shape of the yield curve to suppress short- to medium-term rates - which affect corporate borrowers - without depressing super-long yields too much and reducing returns for pension funds and life insurers.The BOJ chose a rate regime because it had reached the limit of quantitative easing, where it bought targeted amounts of bonds to push down yields, hoping to stoke inflation and economic activity.
To address such side-effects, the BOJ said in July 2018 the 10-year yield could move 0.1 per cent above or below zero. In March 2021, the bank widened the band to 0.25 per cent either direction to breathe life back into a market its buying had paralysed.
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