Dai-ichi Life economist says Bank of Japan can remove yield curve control if risks subside

Toshihiro Nagahama is an economist at Dai-ichi Life Research Institute and a participant in a key government panel

• was invited to speak at the panel’s special session on economic policy held May 15
• Says the Bank of Japan (BOJ
  BOJ
  
  The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ’s main responsibilities include issuing and managing the country’s currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with
  
  The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ’s main responsibilities include issuing and managing the country’s currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with
  Read this Term) may abandon its bond yield
  Yield
  
  A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it.These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as
  
  A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it.These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as
  Read this Term cap this year if risks clouding the outlook, such as global banking sector woes, subside
• said Japan must avoid removing monetary and fiscal support prematurely to ensure recent positive signs in wage and consumption are sustained
• Until there is clarity that wages will keep rising steadily next year, the BOJ must hold off raising its short-term interest rate target from the current level of -0.1%
• As long as short-term borrowing costs are kept low, however, the BOJ could remove a 0.5% cap set on the 10-year bond yield without causing too much damage to the economy
• The BOJ will probably wait until concern over global banking sector woes and the U.S. debt ceiling standoff eases
• “Once such risks subside and markets remain calm, the BOJ may tweak yield curve control,” Nagahama said. “I won’t be surprised if such a move occurs this year.”