July 31, 2018 / 4:45 AM / 4 months ago

BOJ adopts forward guidance on rates, makes framework flexible

TOKYO (Reuters) - The Bank of Japan pledged to keep interest rates “very low” for the time being and took measures to make its massive stimulus program more flexible on Tuesday, reflecting its forecast that it would take time for inflation to hit its 2 percent target.[T9N1TD07B]

COMMENTS:

HIROAKI MUTOU, CHIEF ECONOMIST, TOKAI TOKYO RESEARCH INSTITUTE

“It is a very mild policy change by the BOJ but its policy vector is heading toward tightening. The BOJ’s message was to let long-term yields go higher.

“I think the BOJ was successful in tweaking its policy scheme which did not greatly impact markets but introduced a tool, forward guidance for policy rates, for future tightening.

“The BOJ will be able to send a subtle message to the markets by tweaking its words in forward guidance for policy rates in the future.”

Reporting by Kaori Kaneko; Editing by Chris Gallagher

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