A Bank of Japan board member hinted at the need to consider revising the yield curve control program, supporting the view among some economists that the bank may adjust its signature policy framework next month.
“Yield curve control seemed, in some aspects, to have hampered smooth financing and the bank could consider revising its conduct at this time; however, it was appropriate to wait and see a little longer in light of the situation in global financial markets,” one of nine board members said, according to the minutes of the April policy meeting released Wednesday.
July is the most popular timing to forecast policy change among BOJ watchers surveyed earlier this month, including those from Goldman Sachs and Barclays. The central bank is widely expected to revise up its quarterly inflation forecast then, providing a key reason to move toward normalization, they said.
Around a third of the respondents expected a shift next month, although the majority forecast moves at a later date.
Speaking Wednesday, BOJ Board Member Seiji Adachi signaled his support for Governor Kazuo Ueda’s cautious stance to tighten policy and his preference to keep yield control in place.
“My view is that it’s appropriate to continue monetary easing with the yield curve control framework,” Adachi said in a speech to local business leaders in southern Japan. “The shape of the yield curve has become smooth overall and there is improvement in market functioning.”
The April BOJ minutes also showed that its board members agreed that the distortion in the yield curve is dissolving and there is no need to modify the conduct of yield curve control. That indicates that one member’s view didn’t resonate throughout the board.
Still, many economists say every meeting could result in sudden change as a shift in YCC has to come as a surprise to avoid massive bond selloffs before an official announcement.
The BOJ kept its policy and inflation outlook unchanged at its June meeting last week. Asked about the possibility of changing YCC in July, Ueda didn’t offer any clear hint for either direction at a post-meeting conference.
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