Bank of Japan Gov. Haruhiko Kuroda gave another strong indication that the central bank will continue capping long-term bond yields after holding his first meeting with Prime Minister Fumio Kishida since the yen touched its lowest level since 2015.
¡°Each market operation doesn¡¯t directly affect foreign exchange rates,¡± Kuroda told reporters Wednesday in Tokyo, signaling little concern that the central bank¡¯s buying of bonds could be weakening the yen.
He added that Kishida had made no particular request at their first meeting since November. ¡°Rather, I explained the economic situations at home and abroad,¡± the BOJ chief said.
The remarks indicate that Kuroda remains fully committed to his stimulus framework even as the U.S. Federal Reserve and other central banks raise interest rates to tackle inflation. The divergence in policy helped drive the yen beyond the ?125 mark against the dollar earlier this week.
Kuroda met the prime minister after another morning of aggressive moves by the BOJ to keep a lid on 10-year yields that have been hovering close to the central bank¡¯s upper limit of around 0.25%.
The BOJ surprised investors with a pledge to buy more securities than planned earlier Wednesday and include longer-dated debt on a day when global bonds rallied. The bank is already in the middle of an unprecedented three-day purchase drive to defend the 10-year yield.
The yen strengthened to around the ?121.88 mark against the dollar after the meeting from ?122.89 at the start of the day. The yield on 10-year Japanese government debt was at 0.21% compared with 0.245% at the end of Tuesday.
Despite Kuroda¡¯s remarks, market speculation over the possibility of a government request on monetary policy is likely to continue. BOJ watchers see that Kishida¡¯s view on monetary policy is a key factor to decide the direction of monetary policy this year.
The meeting follows Kishida¡¯s order Tuesday for measures to cushion the impact of soaring energy prices, amplified by a sliding yen, as he looks to keep public support buoyant ahead of a summer election.
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