Bank of Japan Intends to Make Its Massive Stimulus Program More Sustainable

Forex News

The Bank of Japan will hold its monetary policy meeting on 30-31 July. It is reported, that the BoJ will consider at next week’s rate review changing the composition of exchange-traded funds (ETF) it buys as part of is massive stimulus program.

The move will be part of an overhaul the central bank is planning to make to its ultra-loose monetary policy more sustainable, as inflation remains distant from its 2% target. Japan’s core consumer prices rose 0.8% in June from a year earlier, staying distant from the BoJ’s target. The Japan’s central bank appears set to cut its price growth forecasts at the meeting in light of sluggish inflation in recent months.

Under its yield curve control (YCC) policy, the BoJ pledges to guide short-term interest rates at -0.1% and 10-year bond yields around zero percent. It also buys government bonds and risky assets, such as exchange-traded funds and corporate bonds, to flood markets with cash.

Earlier this week, the 10-year Japanese government bond yield soared by the most in almost two years while the yen rallied and stocks after it was reported, that the BoJ was debating changes to its policy to mitigate the side effects on banks.