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In turning point for Kuroda, BoJ to phase out asset-buying goal

March 16, 2021

TOKYO: The Bank of Japan may phase out a numerical target for its risky asset buying at a policy review on Friday, highlighting the rising cost of prolonged easing and marking a turning point for Governor Haruhiko Kuroda’s massive stimulus programme.
The central bank is also likely to clarify how much it will allow bond yields to deviate from its 0 per cent target, and consider steps to address the side effects of negative interest rates.
The accumulating cost of Kuroda’s eight-year experiment to fire up inflation, while battling economic headwinds from the Covid-19 pandemic with a dwindling tool-kit, have raised questions about the sustainability of the BoJ’s easing policy.
“The BoJ’s current framework is a patchwork of measures taken in the past eight years. It’s ideal to clear some of them up,” said former BoJ executive Shigenori Shiratsuka.
“But that’s probably something too ambitious for the BoJ to embark on at the March review.” The BoJ’s review has drawn the close attention of markets as global recovery hopes push up bond yields in many economies including in Japan, challenging the BoJ’s efforts to cap 10-year yields at zero under its yield curve control (YCC) policy.
The findings of its review will be announced after a two-day policy meeting ending on Friday, where the BoJ is widely expected to keep its interest rate targets unchanged.
With its massive buying drawing criticism for distorting markets, the BoJ will make its purchases of exchange-traded funds similar to currency intervention: stepping in only when a shock event triggers market turbulence.