The BOJ Was Unfazed By The Rise In Bond Yields, Signaling Its Determination To Continue Raising Interest Rates
Bank of Japan Governor Kazuo Ueda on Wednesday took in stride recent rises in bond yields, saying they were a natural reflection of market expectations of future interest rate hikes by the central bank.
The remarks underscore the BOJ's resolve to keep raising short-term interest rates, and to allow markets to freely price in the opportunity of further increases in borrowing costs.
While long-term interest rates have risen since last year, their moves should primarily be determined by market forces, Ueda told parliament.
"Long-term interest rates move on various factors. But the biggest determinant is the market's forecast on the outlook for our short-term policy rate," Ueda told parliament on Wednesday.
"It's natural for long-term rates to move in a way that reflects such market forecasts," he said.
There was no big divergence between the BOJ's view and that of markets, he added, when asked about the recent steady rise in bond yields.
Markets have been focusing on whether the BOJ would issue a fresh warning after Japanese government bond (JGB) yields rose to their highest levels in more than a decade this week.
Ueda's remarks highlight the central bank's intention to phase out its presence from the bond market and convince investors that having ended its bond yield control policy last year, it will no longer step in to keep yields ultra-low.
In a speech last week, BOJ Deputy Governor Shinichi Uchida said a healthy, functioning market requires traders to form their own view on the central bank's rate path based on their projections on the economic outlook - signaling the bank's preference to allow market forces to determine yield moves. U.S. and Japanese stock prices. It stood at 1,530% on Wednesday.
Source: Investing.com
