As central banks dive into the uncharted waters of yield curve control, Japan, the pioneer of the unorthodox policy, is struggling to stay focused on its own yield targets as it looks instead to money printing to help firms hit by the coronavirus.
FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda wearing a protective face mask attends a news conference as the spread of the coronavirus disease continues in Tokyo, Japan, April 27, 2020, in this photo released by Kyodo. Mandatory credit Kyodo/via REUTERS
“The BOJ’s near-term focus will remain on keeping markets stable and easing corporate funding strains,” said a source familiar with its thinking, a view echoed by two more sources. The BOJ became the first central bank to introduce yield curve control in 2016, pledging to guide short-term rates at -0.1% and long-term borrowing costs around zero.
Australia now sets a target for three-yield bond yields and some Federal Reserve officials have cited YCC as a potential tool including Chairman Jerome Powell. That stimulus mix creates challenges for the BOJ in the way it communicates and guides market expectations.
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