BOJ’s policy tweak drew rare request to adjourn from govt – minutes

FILE PHOTO: People walk at the headquarters of Bank of Japan in Tokyo, Japan, January 18, 2023. REUTERS/Issei Kato/File Photo

By Leika Kihara

TOKYO (Reuters) -Government officials who attended the Bank of Japan’s December policy meeting were given a half-hour adjournment to contact their ministries, minutes showed, underscoring the significance of the central bank’s decision to tweak its bond-market peg.

At the Dec. 19-20 meeting, the BOJ kept its ultra-easy monetary policy but shocked markets with a surprise change to its yield curve control (YCC) policy that allowed long-term interest rates to rise.

Before the nine-member board voted on the steps, the government representatives requested that the meeting be adjourned for about 30 minutes, the minutes showed on Monday.

Governor Haruhiko Kuroda approved the request as chair of the BOJ meeting, according to the minutes.

“The government understands the matters discussed today were aimed at conducting monetary easing in a more sustainable manner with a view to achieving the BOJ’s price target,” a Ministry of Finance (MOF) official attending the meeting was quoted as saying, referring to the central bank’s inflation objective.

Another government representative, who belonged to the Cabinet Office, urged the BOJ to be vigilant about the fallout from rising inflation, supply constraints and market volatility on Japan’s economy, the minutes showed.

The two representatives did not voice opposition to the yield control tweak nor any other elements of the BOJ’s discussion, the minutes showed.

Two government representatives – one from the MOF and another from the Cabinet Office – are legally entitled to attend BOJ policy meetings and voice the government’s views on policy decisions, though they cannot cast votes.

In a news conference on Monday, Finance Minister Shunichi Suzuki said he had been briefed by the MOF representative on the BOJ’s expected decision during the adjournment.

It is rare for the government representatives to seek adjournment in the BOJ meetings, which only happens in times of key decisions such as a change in monetary policy.

For example, the government was granted an adjournment during a meeting when the BOJ introduced negative interest rates in January 2016, according to minutes of that meeting.

Under YCC, the BOJ sets the short-term interest rate target at -0.1% and that of the 10-year bond yield around 0% with a small tolerance band.

At the December meeting, the band set around the 10-year yield target was doubled to 0.5 percentage point up and 0.5 percentage point down, a move aimed at ironing out market distortions caused by the BOJ’s heavy bond buying.


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