Jun 13, 2020 (Japan Today) - As central banks dive into the uncharted waters of yield curve control, Japan, the pioneer of the unorthodox policy, is struggling to stay focused on its own yield targets as it looks instead to money printing to help firms hit by the coronavirus.
The Bank of Japan is expected to hold off expanding stimulus at its policy meeting next week and make no major changes to a set of tools rolled out in recent months to cushion the economic blow from the health crisis.
But BOJ Governor Haruhiko Kuroda is likely to stress the bank’s resolve to keep flooding markets with cash to help companies stay afloat and forgo job cuts.
“The BOJ’s near-term focus will remain on keeping markets stable and easing corporate funding strains,†said a source familiar with its thinking, a view echoed by two more sources.
“Interest rate cuts remain in the BOJ’s tool-kit. But it’s probably not the most likely option now,†the source said.
While warning of risks over the outlook, the BOJ is likely to maintain its view the economy will gradually recover from the damage wrought by the pandemic.
The BOJ became the first central bank to introduce yield curve control (YCC) in 2016, pledging to guide short-term rates at -0.1% and long-term borrowing costs around zero.
Back then, the policy was seen by other central banks as a sign of Japan’s desperation to revive growth through extreme measures.
Now, yield targeting has adopted broader appeal as the pandemic forced many central banks globally to cut rates to near zero.
