The Bank of Japan has taken one of its final steps to end its seven-year policy of capping long-term interest rates, setting the stage for bigger policy changes as it sharply raises its inflation outlook.
The BoJ’s policy board on Tuesday made a unanimous decision to allow yields on the 10-year Japanese government bond to rise above 1 per cent, revising its so-called yield curve control policy for the second time in three months.
The bank said the 1 per cent ceiling on 10-year yields would be regarded as “a reference”, noting that strictly capping long-term interest rates could entail “large side effects”. The BoJ previously said it would offer to buy 10-year bonds at 1 per cent in fixed-rate operations, after raising the cap from 0.5 per cent in July.