The Bank of Japan should specify a two-year limit for its unprecedented monetary easing to help quell bond-market volatility, according to one of the central bank’s board members.
BOJ minutes released in Tokyo today show that the suggestion was made by the unidentified policy maker at a meeting held on May 21-22. The bank could state that easing “should be restricted to about two years” and then be reviewed “in a flexible manner,” the board member said, according to the record of the meeting. Takahide Kiuchi is the board member previously publicly identified as favoring a time-frame of about two years.
Governor Haruhiko Kuroda is trying to jump-start the world’s third-biggest economy without triggering a jump in yields that makes the nation’s debt load unsustainable. Japan’s 10-year bond yields have swung from a record low of 0.315 percent to as much as 1 percent since the central bank announced in April a plan to double monthly debt purchases to more than 7 trillion yen ($74 billion).
The minutes showed the policy maker’s views that the bank’s communication about its easing plans “might be destabilizing expectations for the bond market” and increasing volatility.
Swings in stocks, bonds and the yen threaten to undermine confidence in the campaign by Kuroda and Prime Minister Shinzo Abe to drive a return to sustained growth after 15 years of deflation. The Nikkei 225 Stock Average rose 2.8 percent as of 11:26 a.m. in Tokyo after plunging 6.4 percent yesterday.
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