Bank of Japan Governor Haruhiko Kuroda pushed through changes to his radical monetary stimulus program as the central bank prepares for a longer struggle to stoke inflation.
While keeping unchanged its two major benchmarks -- the negative interest rate and 10-year yield target -- the BOJ took a number of steps to alleviate the strain on banks and the market distortions stemming from its stimulus. Yet Kuroda also indicated that BOJ will tolerate 10-year yields deviating as much as 0.2 percent from zero, compared with 0.1 percent now.
The BOJ cut its inflation forecasts, showing it’s preparing for an even longer battle to generate 2 percent price gains, further widening the gap with global peers who are moving away from crisis-era policies. The headline of the BOJ’s statement underscored the goal: "Strengthening the Framework for Continuous Powerful Monetary Easing."
The operational tweaks will see the BOJ apply negative interest rates on fewer bank reserves to cushion the impact on commercial lenders, allow more movement in 10-year bond yields and adjust its purchases in the stock market. It added forward guidance for policy rates in its statement, saying it intends to maintain the current extremely low levels of short- and long-term interest rates for an "extended period of time."
Because of the side effects of its policies, such as the blow to banks’ profits, the central bank has faced questions about how long it could keep them in place. Inflation remains less than halfway to the target after more than five years of extraordinary stimulus.
Source : Bloomberg