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BOJ members call for early revision of YCC at June meeting – Summary

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan should discuss revising its yield curve control (YCC) policy sooner, a board member said at a meeting. The June policy meeting, a summary of the rate review comments released on Monday.

While the central bank should keep overall monetary policy ultra-loose, it should discuss tweaking the YCC to improve market function and mitigate its impact, the member said, “at a high cost.”

This is the first time in the BOJ summary that a board member explicitly mentions the need for an early debate on YCC adjustments.

“The central bank should maintain the overall framework of monetary easing for the time being,” the member said.

“That is, changes to the YCC’s treatment should be discussed,” the commissioner said, “considering the need to prevent large swings in interest rates in view of future phases of exiting current monetary policy.

US dollar down 0. 23% against the yen after the release of the BOJ’s summary, as some market participants interpreted the comment as a signal that the YCC may be changing sooner.

While the summary does not identify who made the comments, board member and former merchant banker Naoki Tamura publicly warned of rising costs for the YCC, such as market dysfunction and shrinking bank profits.

At June meeting, BoJ maintained ultra-loose monetary policy, including YCC target – short-term rate set at -0.1%, 10 1-year bond yield set at around 0% possibility, as it will take more time to determine whether wages will rise enough to sustain them sustainably. Inflation hit the bank’s 2 percent target.

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