BoJ launches policy overhaul in fresh inflation push

Japan’s central bank on Wednesday unveiled a surprise overhaul of monetary policy, promising to redouble attempts to fuel inflation and kickstart the torpid economy.

After a hotly anticipated meeting, the Bank of Japan said it would set a target for 10-year government bond yields to try to push them higher, while delaying a further cut in interest rates into negative territory.

The bank also loosened its annual asset-buying target — a key feature of its more than three-year-old policy — saying the target could instead fluctuate to give it flexibility while focusing on keeping bond yields steady.

In response, the benchmark 10-year bond jumped into positive territory for the first time since March but quickly sank bank.

The bank also repeated pledges to continue monetary easing as needed until inflation reaches and stabilises at its 2.0 percent target, which was first unveiled over three years ago.

Prices are still nowhere near that level. But BoJ chief Haruhiko Kuroda waved off suggestions Wednesday’s announcement marked any rollback.

“(This) doesn’t mean we’ve abandoned the previous policy,” he told reporters in Tokyo, adding that the Boj’s inflation goal “has not changed a bit”.

The announcement — hours before the US Federal Reserve ends its latest meeting — appeared aimed at critics of the BoJ, including banks and insurance companies that have been hit by its negative rate policy.

Negative rates are meant to encourage lending to people and businesses by effectively charging banks to keep excess reserves in the BoJ’s vaults. But commercial lenders have complained they are eating into profits.

The central bank also said it would lift controls on maturities of the bonds it buys under the huge asset-purchase plan — there are concerns it is running out of government bonds that it can buy, sparking volatility in debt markets.