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Japan’s new yield curve target

by OMFIF and National Bank of Poland analysis

Wed 19 Apr 2017

Japan’s new yield curve target: flexibility and transparency Enlarge Chart loading Image

After implementing yet another innovation on yield curve targeting in September, the Bank of Japan published further details on its purchase of Japanese government securities. As a result, the Bank has started to disclose data – on a monthly basis – regarding the volume and type of bonds to be purchased, the frequency of purchases, and a method for auctions.

Subsequently, the BoJ has announced that it will buy in April between ¥6.3tn-¥9.8tn (around $57bn-$88bn) of government bonds. The announcement forms part of the Bank’s efforts to enhance transparency. Market participants have greeted the measure positively. In particular the new details have lowered uncertainty about the scheduling of auctions.

Market participants have welcomed the clarity of the BoJ’s commitment to yield curve control. By offering a range (and not a single numerical target) of bonds to be purchased, the Bank has gained valuable operating flexibility. As a result, its programme should be less susceptible to swings in market sentiment.

This analysis was led by Pawel Kowalewski, Economic Adviser in the Bureau of Monetary Policy Strategy at the National Bank of Poland, with contributions from Danae Kyriakopoulou, Head of Research at OMFIF.