Having leaked in advance everything that it plans to announce, overnight the BOJ held its Monetary Policy Meeting (MPM), and, as was widely expected, it maintained its monetary policy framework intact including yield curve control while slightly loosening its grip on long-term bond yields and laid the groundwork to taper its huge purchases of risky assets, as part of steps to make its ultra-easy policy sustainable enough to weather a prolonged battle to fire up inflation; the changes included a wider-than-previously-thought movement range for bond yields and the scrapping of a buying target for stock funds.
Here are the key highlights:
The bank "clarified" (following some now typical confusion) that its tolerable band for fluctuations of 10-year JGB yields is around ±25 bp from the target level, widening from ±20 bp previously. At the same time, it introduced "fixed-rate purchase operations for consecutive days" to maintain the upper limit of its tolerable band.
To give itself more room to wind down its massive stimulus, the central bank also removed an explicit guidance to buy ETF and J-REITs at an annual pace of roughly ¥6 tn and ¥90 tn, respectively. Instead, the BOJ now plans to continue purchasing ETFs and J-REITs with upper limits of ¥12 tn and ¥180 bn on an annual basis, respectively. These upper limits were originally set as a temporary COVID-19 countermeasure. The BOJ also said it will focus on buying ETFs tracking the Topix rather than the Nikkei 225 (which led to selling of Nikkei 225 stocks and a rebound in the Topix).
The BOJ announced the introduction of a new...