BOJ member called for early revision of YCC at June meeting

© Reuters. FILE PHOTO: People walk in front of the bank of Japan building in Tokyo, Japan, April 7, 2023. REUTERS/Androniki Christodoulou

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan should discuss revising its yield curve control (YCC) policy at an early stage, a board member was quoted as saying at a June policy meeting, a summary of opinions at the rate review released on Monday.

While the central bank should keep overall monetary policy ultra-loose, it should debate tweaking YCC to improve market function and mitigate its “high cost,” the member was quoted as saying.

It was the first time the BOJ summary showed a board member explicitly mentioning the need for an early debate of a tweak to YCC.

“The Bank should maintain the overall framework of monetary easing for the time being,” the member said.

“That said, a revision to the treatment of YCC should be discussed at an early stage,” taking into account the need to prevent sharp fluctuations in interest rates in the future phase of an exit from current monetary policy, the member said.

The dollar fell 0.23% against the yen after the release of the BOJ summary as some market players interpreted the comment as signalling the chance of an early change to YCC.

While the summary does not identify who made the comments, board member and former commercial banker Naoki Tamura has publicly warned of the rising cost of YCC such as causing market dysfunction and narrowing bank margins.

At the June meeting, the BOJ maintained ultra-easy monetary policy including its YCC targets – set at -0.1% for short-term interest rates and around 0% for the 10-year bond yield.

BOJ Governor Kazuo Ueda has repeatedly ruled out the chance of an early end to ultra-loose policy, including YCC, due to the need to spend more time determining whether wages will rise enough to sustainably keep inflation at the bank’s 2% target.

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