Japan's Central Bank Signals Readiness to Intervene in Bond Market
Bank of Japan Governor Kazuo Ueda expressed willingness to intervene in the bond market to address surging yields. Ueda emphasized the BOJ's commitment to stability, echoing concerns raised by government officials about market fluctuations.
Prime Minister Shigeru Ishiba acknowledged the potential impact of elevated yields on government finances due to Japan's high debt-to-GDP ratio. Finance Minister Katsunobu Kato expressed similar concerns, highlighting the strain on government finances.
Ueda acknowledged the market's role in determining yields but indicated the BOJ's readiness to intervene should volatility become excessive. The central bank previously stated that it would increase bond purchases and conduct fixed-rate operations to mitigate rapid long-term interest rate increases.
Ueda's comments reiterated the BOJ's long-held stance of intervening to foster stable yield formation. Despite ending its stimulus program in 2023, the BOJ remains closely attuned to market movements due to its extensive bond holdings.
The recent yield rise, Ueda noted, reflects market sentiment on the economic recovery and improving inflation. However, he emphasized the need for a long-term perspective in assessing the impact of rising yields on various sectors, including banks.
Overall, Ueda's remarks underscore the BOJ's commitment to maintaining stability in the bond market, while acknowledging the market's role in pricing.