TOKYO : A new monetary tool introduced by the Bank of Japan to keep long-term interest rates from rising could ultimately become a new policy target once the bank abandons its yield control, a former central bank official told Reuters.
Specifically, the BOJ amended rules for an existing market operation tool, so it can pump funds extending up to 10 years in variable rates to financial institutions against collateral. Tetsuya Inoue, a senior researcher at Nomura Research Institute and a former BOJ official, said the central bank probably had another, long-term objective for the tool: guiding interest rates after ending yield curve control , a policy that sets a -0.1 per cent target for short-term rates and that for the 10-year bond yield around zero.
"With this new tool, the BOJ may have prepared for when it ends YCC and begins normalising monetary policy," Inoue told Reuters on Thursday.
Source: Loan Digest (loandigest.net)
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