Headline: BOJ’s Ueda Signals Willingness to Curb Disorderly Moves in Long-Term Yields
Introduction: Bank of Japan Governor Kazuo Ueda reaffirmed the central bank’s flexible approach to the bond market, indicating that while long-term yields should largely reflect market forces, the BOJ stands ready to step in if moves become disorderly or detached from fundamentals.
Ueda emphasized that long-dated Japanese government bond (JGB) yields are shaped by expectations for future short-term rates and shifts in term premiums. He noted the BOJ would tolerate market-driven adjustments but could respond—with tools such as increased JGB purchases—if volatility undermines orderly market conditions. The message signals continuity in the BOJ’s gradual normalization framework, prioritizing financial stability while allowing the yield curve greater room to reflect economic data.
On inflation, Ueda separated near-term and longer-run drivers. Short-term price pressures are highly sensitive to supply and demand dynamics in the real economy, while over time, the stance of monetary policy exerts more influence through demand channels. His comments underscore the BOJ’s twin aims: fostering sustainable inflation alongside wage growth and maintaining market function as Japan navigates a complex transition away from ultra-loose policy.
Key Points: – BOJ Governor Kazuo Ueda said long-term yields should be market-driven unless moves become disorderly. – The central bank is prepared to act, including by increasing Japanese government bond purchases, to stabilize markets. – Long-term rates are influenced by expectations for future short-term rates and changes in term premiums. – Near-term inflation is driven by real-economy supply–demand conditions; over time, monetary policy plays a larger role. – The BOJ aims to support moderate inflation and wage growth while preserving orderly bond market conditions.
