BOJ’s Amamiya says they need to keep yield curve ‘low’

TOKYO (Reuters) – Bank of Japan Deputy Governor Masayoshi Amamiya said on Monday that the central bank needs to focus on keeping the overall yield curve “low” at this time, given the economic downturn. suffering from the pandemic coronavirus infection.

But he added that he personally felt that bond yields should be allowed to move more around the 0% BOJ target “as long as it does not reduce the impact of cash discounts”.

The BOJ’s policy review in March will discuss how you can balance the need to keep borrowing costs low and reduce long-term discounts, such as a decline in bond market activity, he said.

“Significant fluctuations in interest rates can have an effect on desirability. However, when limited to a specific area, it is possible to strengthen bond market activities, without reducing the monetary impact of our policy, ”he said in a speech.

10-year Japanese government bond (JGB) bond times fell by about 0.1 points following Amamiya’s comments.

Amamiya said there was no change in the BOJ’s view that too much reduction in interest rates for too long is hurting the margins of pension money and insurers.

But he said the BOJ’s near-term focus was to keep bond yields relatively low, echoing comments made by Governor Haruhiko Kuroda on Friday.

“At this stage, it is important to keep the whole production curve to a minimum … as the economy is suffering a blow from the coronavirus pandemic. At the moment, we need to steer the output loop control with this point in mind, ”said Amamiya.

Amamiya also said that the BOJ will seek ways to develop cuts in interest rates as a currency discounting tool.

“Some market players believe that the BOJ cannot and will not make policy easier because of the side effects of its policy. We need to change those attitudes ”by finding ways to reduce the cost of further monetary concessions, he said.

Regarding the purchase of BOJ risky assets, Amamiya said the BOJ will consider how they can maximize the positive impact of these measures by promising aggressive purchases when needed.

The BOJ will review its policy tools in March to make them more “effective and sustainable” as the pandemic forces it to force a radical stimulus program longer than expected.