December 26, 2022
Bank of Japan
Toward Achieving the Price Stability Target
in a Sustainable and Stable Manner,
Accompanied by Wage Increases
Speech at the Meeting of Councillors of Keidanren
(Japan Business Federation) in Tokyo
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
It is a great honor to have this opportunity to address such a distinguished gathering of
business leaders in Japan today.
The year is almost coming to a close. Looking back on 2022, domestic and overseas
economies have been hit by various shocks, while the impact of the novel coronavirus
(COVID-19) has persisted. Russia's invasion of Ukraine has triggered a rapid rise in prices
of commodities, including energy and grains. In addition to this, factors such as supply-side
constraints, including difficulties in procuring parts that have arisen during the course of
recovery from the pandemic, have caused goods prices to rise worldwide. Moreover, labor
market conditions have tightened substantially, mainly because demand, which had been
suppressed by the pandemic, has risen significantly during the course of economic recovery.
These high commodity prices and tightening labor market conditions have intensified global
inflationary pressure, and inflation rates, particularly in the United States and Europe, have
risen to levels not seen in four decades (Chart 1).
In order to prevent high inflation from becoming entrenched, central banks in the United
States and Europe have raised policy interest rates rapidly. While the effects of monetary
tightening feed through to economic activity and prices with a certain time lag, the
International Monetary Fund (IMF) and other international organizations have forecast that
inflation rates in the United States and Europe will fall next year. However, they have also
projected that the growth rates for these economies will fall significantly due to the effects
of monetary tightening, and that some economies will see negative growth. Unemployment
rates are expected to rise in line with an easing of labor market conditions. Federal Reserve
Chair Jerome Powell stated that this situation "will also bring some pain to households and
businesses. These are the unfortunate costs of reducing inflation. But a failure to restore
price stability would mean far greater pain." Central banks in Europe have shown clear
commitments to calming inflation while accepting the risk of there being some adverse
economic effects. In sum, overseas economies are likely to remain subject to extremely high
uncertainties next year. Japan, on the other hand, is expected to continue to see relatively
stable economic growth. This is largely due to the difference in the timing of the economic
resumption from the pandemic and to the fact that, unlike in the United States and Europe,
accommodative financial conditions have been maintained in Japan. Moreover, while
unemployment rates are likely to rise in the United States and Europe, it is expected that the
rate will fall further in Japan and that labor market conditions will tighten.
The Bank of Japan aims at achieving the price stability target in a sustainable and stable
manner, accompanied by wage increases. Today, I would like to talk about economic
activity and prices in Japan and the recent conduct of monetary policy based on their
developments, and then discuss in detail the characteristics of the labor market and wage
formation in Japan.
I. Recent Economic and Price Developments and the Bank's Conduct of Monetary
Policy
Economic and Price Developments
Let me start with economic developments. Japan's economy, despite being affected by
factors such as high commodity prices, has picked up as the resumption of economic
activity has progressed while public health has been protected from COVID-19 (Chart 2).
The driving force behind the pick-up in the economy has been the recovery in services
demand, which is associated with the resumption of economic activity, and the virtuous
cycle in the corporate sector from profits to investment.
Looking at services demand, economic activity in the accommodations as well as eating and
drinking services industries, which had been constrained by COVID-19, has picked up
clearly. The introduction of the government's domestic travel discount program in October
has also boosted the recovery in demand. The average number of inbound visitors for the
January-September period was low -- being only around 4 percent of the number recorded
in pre-pandemic 2019. However, reflecting the easing of COVID-19 border controls in
October, the number of inbound visitors has improved: the figures for October and
November 2022 were 20 percent and 38 percent, respectively, of the number recorded in
2019. Given this improvement, inbound tourism demand has started to recover. The
increase in mobility has had a positive effect not only on the accommodations as well as
eating and drinking services industries, but also on the transportation industry and the
entertainment and recreation industry.
Turning to the corporate sector, profits have remained at high levels, despite headwinds
such as high commodity prices. Business fixed investment on an SNA basis has recovered
moderately, with quarter-on-quarter rates of change increasing to 2.0 percent for the
Tankan
April-June quarter and 1.5 percent for the July-September quarter. The (Short-Term
Economic Survey of Enterprises in Japan) released this month shows a year-on-year rate of
increase of around 15 percent in business fixed investment planned for fiscal 2022, again
suggesting an active investment stance among firms.
With regard to the outlook, Japan's economy is likely to recover, with the impact of
COVID-19 and supply-side constraints waning, although it is expected to be under
downward pressure stemming from high commodity prices and slowdowns in overseas
economies. Although private consumption is expected to be under downward pressure from
the real income side due to price rises, it is projected to continue increasing. This is mainly
because pent-up demand is likely to materialize, supported by household savings that had
accumulated as a result of pandemic-related restrictions, as the resumption of consumption
activities progresses further while public health is being protected. In addition, an uptrend in
business fixed investment is expected to become clear as accommodative financial
conditions provide support and supply-side constraints wane.
I will now turn to price developments. The year-on-year rate of change in the consumer
price index (CPI) for all items excluding fresh food was 3.7 percent in the latest figures, for
November (Chart 3). The recent rise in inflation is mainly driven by energy, food,
dining-out, and durable goods including white goods. All of these items are highly
dependent on imported goods. The current rise in CPI inflation is due to a rise in import
prices that reflects high commodity prices and the yen's depreciation, and to the resultant
pass-through of cost increases. It should be noted, however, that international commodity
prices, including crude oil prices, have already turned to a decline, as market participants
have factored in the slowdowns in overseas economies. The effects of the pass-through led
by the rise in import prices are likely to wane after the turn of the year. For this reason, it is
projected that the year-on-year rate of increase in the CPI will decelerate toward the middle
of fiscal 2023.
That said, there have been significant uncertainties over the outlook for both economic
activity and prices. Particular attention is warranted on developments in overseas economic
activity and prices. As I said at the beginning, central banks in the United States and Europe
have raised policy interest rates rapidly to contain inflation, and there is concern in the
market over whether it is possible to contain inflation and maintain economic growth
simultaneously. With central banks continuing to make rapid policy interest rate hikes, there
is a risk that global financial conditions will tighten further through adjustments in asset
prices, fluctuations in foreign exchange markets, and capital outflows from emerging
economies, and that this will eventually lead to overseas economies deviating downward
from the baseline scenario. Taking this risk into account, it is necessary to pay due attention
to developments in financial and foreign exchange markets and their impact on Japan's
economic activity and prices. In addition, careful monitoring is required of the course of
COVID-19 at home and abroad and its impact.
The Bank's Conduct of Monetary Policy
Next, I will talk about the Bank's conduct of monetary policy. Although Japan's economy
has picked up, it has been under downward pressure stemming from high commodity prices.
It is also on its way to recovery from the pandemic, as seen in the fact that its GDP has not
recovered to the pre-pandemic level. In addition, there have been extremely high
uncertainties for Japan's economy, including developments in overseas economic activity
and prices, the situation surrounding Ukraine, and the impact of COVID-19. The CPI
inflation rate currently exceeds 2 percent, but it is expected to decelerate to below 2 percent
from fiscal 2023 in terms of the fiscal-year average. Given these developments in economic
activity and prices, the Bank deems it necessary to conduct monetary easing and thereby
firmly support the economy and provide a favorable environment for firms to raise wages.
To this end, at the Monetary Policy Meeting held last week, the Bank decided to continue
with large-scale monetary easing, in which it set the short-term policy interest rate at minus
0.1 percent and the target level of 10-year Japanese government bond (JGB) yields at
around zero percent. The Bank also decided to modify the conduct of yield curve control in
order to facilitate the transmission of monetary easing effects, including to corporate
financing (Chart 4). These decisions were made unanimously by the Policy Board.
Since early spring this year, volatility in overseas financial and capital markets has
increased and this has significantly affected these markets in Japan. Ten-year JGB yields
had been at low levels between around plus and minus 0.25 percentage points from the
target level under the Bank's framework of yield curve control. However, deterioration had
been observed in the functioning of Japan's bond markets, particularly in terms of relative
relationships among interest rates of bonds with different maturities and arbitrage
relationships between spot and futures markets. For example, interest rates of bonds with
8-9 years of maturity had been higher than those of bonds with 10-year maturity, and a price
gap had been observed between spot and futures markets. In addition, while the yields for
on-the-run issues of 10-year JGBs, which are eligible for fixed-rate purchase operations,
had been at 0.25 percent or lower, issues of 20-year JGBs with a residual maturity of 10
years were traded at a higher interest rate (Chart 5).
As you know, yields on JGBs are reference rates for corporate bond yields, bank lending
rates, and other funding rates. We had seen such distortions in the JGB market being
adjusted in the corporate bond market in the form of an expansion in their spreads.
Financial conditions, mainly of firms, remain accommodative on the whole, but our view
was that if the aforementioned market conditions persist, this could have a negative impact
on financial conditions such as issuance conditions for corporate bonds. With a view to
improving market functioning while maintaining accommodative financial conditions, the
Bank decided to implement several measures in conducting yield curve control.
First, the Bank will maintain the yield curve at a low level by increasing the amount of
monthly JGB purchases from 7.3 trillion yen to about 9 trillion yen. Moreover, it will
expand the range of 10-year JGB yield fluctuations from the target level: from between
around plus and minus 0.25 percentage points to between around plus and minus 0.5
percentage points. Other than with regard to the maturity of 10 years, the Bank will make
nimble responses for each maturity by increasing the amount of JGB purchases even more
and conducting fixed-rate purchase operations. These measures will make it possible for the
Bank to encourage a smoother formation of the yield curve while maintaining it at a low
level. In fact, under the guideline for market operations decided at the December Monetary
Policy Meeting, yield increases for JGBs with maturities other than 10 years were contained,
although there has been a rise in 10-year JGB yields, which had seen a distortion (Chart 6).
Furthermore, with respect to policy responses to the corporate bond market, the Bank is
currently adjusting the amount outstanding of corporate bonds, so that it will return to the
pre-pandemic level. In this adjustment, the Bank will give due consideration to issuance
conditions for these bonds.
Although these measures are expected to expand the range of 10-year JGB yield
fluctuations, in continuing with monetary easing under the framework of yield curve control
going forward, they have the significant merit of facilitating the transmission of monetary
easing effects, such as through corporate financing, while maintaining the function of JGB
yields as reference rates. As I just described, these measures have been implemented to
conduct monetary easing in a sustainable and smooth manner while taking into account the
transmission of monetary easing effects, including to corporate financing; this is definitely
not a step toward an exit. The Bank will aim to achieve the price stability target in a
sustainable and stable manner, accompanied by wage increases, by continuing with
monetary easing under the framework of yield curve control.
II. Characteristics of the Labor Market and Wage Formation in Japan
Now, I would like to talk about the characteristics of the labor market and wage formation
in Japan.
In April 2013, the Bank introduced quantitative and qualitative monetary easing (QQE), a
large-scale monetary easing framework still in place today, with the aim of achieving the
price stability target. It should be noted that the Bank's goal is not merely to achieve
inflation. In this regard, let me reiterate what I said in my speech at a Keidanren meeting
nine years ago: "the Bank aims at creating and embedding an economic virtuous cycle of a
moderate rise in prices, an increase in sales and profits, an increase in wages, a boost in
consumption, and a moderate rise in prices." In other words, in order to achieve the price
stability target in a sustainable and stable manner, it is crucial that price rises are backed by
increases in corporate sales and profits, and by growing wages. A simultaneous increase in
both wages and prices was observed as a matter of course even in Japan until around the
mid-1990s (Chart 7). In addition, as many of you here today may feel, as executives of
global businesses, it is quite natural in other economies for both prices and wages to rise
simultaneously.
With the introduction of QQE, Japan's economy has improved significantly and labor
market conditions have tightened, also supported by government measures and various
initiatives by firms. Under these circumstances, a positive inflation rate has taken hold, and
wage growth has also been positive on average, albeit with fluctuations. Thus, Japan's
economy is no longer in deflation, in the sense of a sustained decline in prices. However, we
have not yet reached a situation where the price stability target of 2 percent has been
achieved in a sustainable and stable manner, accompanied by wage increases.
As background to this current situation, the Bank's Assessment for Further Effective and
Sustainable Monetary Easing in March last year highlighted the following factors. First,
people's mindset and behavior based on the assumption that prices will not increase easily
have become deeply entrenched because of the experience of prolonged deflation, and it
will take time for this mindset and behavior, especially firms' price- and wage-setting
behavior, to change. Second, upward pressure on wages has been absorbed due to an
increase in labor supply as a result of the advance in labor force participation of women and
seniors. Today, I would like to examine whether there have been any changes in these two
factors.
Let me start with firms' price-setting behavior. The diffusion index (DI) for output prices in
the December Tankan shows that an increasing number of firms have raised prices recently
(Chart 8). This is due to the substantial increase in input costs led by the rise in import
prices. Of course, there have been other periods in the past when input costs rose
substantially, although not to the same extent as this time. However, for a long time, it has
been difficult for firms to pass on these cost increases due to the severe competitive
environment. One likely reason for this is that firms, taking account of price-setting by
others in their particular industry, have been reluctant to pass on higher costs to maintain
their price competitiveness. In the current phase, the rise in import prices has been large in
terms of both size and the range of items affected, and thus many firms have passed on cost
increases. However, the impact of the rise in import prices, which has caused costs to rise,
will eventually dissipate. It is necessary to examine whether the change in price-setting
behavior currently seen will take hold as the new norm, but for this to happen, it is
important for the virtuous cycle of wage increases and price rises that I mentioned earlier to
continue. The reason is that widespread wage hikes will put upward pressure on costs by
increasing firms' personnel expenses, while at the same time, demand will increase through
improvement in household income, and this is likely to lead to moderate inflation.
Now, I would like to consider the wage-setting behavior of firms. To do so, I will first
review the structure of the labor market in Japan.
Characteristics of the Labor Market and Wage Formation in Japan
A major feature of Japan's labor market is its "dual structure," consisting of two types of
employment with different characteristics: regular employment with low job mobility as
characterized by the term "lifetime employment," and the other, non-regular employment
(Chart 9). The determinants of wages differ between the two types of employment.
Looking back at long-term trends in Japan's labor market, a major characteristic is that the
number of non-regular employees has increased over the past three decades or so. Since
wages of non-regular employees are generally lower than those of regular employees, the
increase in the share of non-regular employees has pushed down average nominal wages in
Japan, curbing their growth. From the mid-1990s, firms' perception of excess regular
employment strengthened significantly during the process of adjustment triggered by the
collapse of the bubble economy, and the number of regular employees followed a
downward trend.1 Non-regular employment filled the resulting gap or continued to grow
even more, so that the share of non-regular employees increased at a rapid pace.
Recent years have seen changes in this trend. While the number of non-regular employees
has continued to rise, the number of regular employees has turned to an increase, mainly
reflecting firms' efforts to retain human resources in response to growing labor shortages,
which are partly due to economic improvement. As a result, the pace of increase in the share
of non-regular employees has reached a plateau. Even though Japan's working-age
population (i.e., those aged 15-64) has continued to decline since peaking in 1995, a
simultaneous increase in the number of both regular and non-regular employees was
possible because of the increased labor force participation of women and seniors. Their
labor force participation has advanced, mainly because improvement in the economy has
led to greater job opportunities and because the government and firms have taken steps to
support a variety of working styles. This has led to a significant rise in the overall labor
force participation rate. The resulting increase in labor supply is one of the factors that has
suppressed the average growth rate of wages from a macroeconomic perspective. However,
I would like to emphasize that this increase in labor supply has boosted employee income
overall and has had a positive effect on economic growth.
This "dual structure" of the labor market has important implications for predicting future
wage trends. The reason is that the wage formation mechanism differs depending on the
type of employment (Chart 10). In particular, the degree to which wages respond to labor
demand differs substantially between regular and non-regular employment. Labor market
conditions for both regular and part-time employees have been tightening consistently over
the past decade, excluding the early phase of the pandemic. Over the past decade, hourly
wages for part-time employees have continued to register a relatively high increase, at an
average rate of about 2 percent, while wages for regular employees have only grown at a
very modest rate of less than 1 percent.
This difference is due to differences in job mobility in the two types of employment. In the
case of non-regular employment, wages tend to reflect labor market conditions due to the
high degree of job mobility. On the other hand, job mobility in regular employment is
generally considered to be low due to long-term employment practices. Furthermore,
another aspect of regular employment is that the experience of the weak economic growth
that followed the collapse of the bubble economy led both labor and management to
prioritize maintaining employment, resulting in restrained wage increases. The fact that
wages of regular employees, who account for the larger share of total employment, have not
risen so high is also a factor that restrained overall wage growth from a macroeconomic
perspective, despite a tightening of labor market conditions.
Differences in mobility can also be found across firm sizes, industries, and age groups
(Chart 11).2 For example, regular employees in small and medium-sized firms are more
likely to change jobs in search of better working conditions than those in large firms.
Because of the higher degree of job mobility at small and medium-sized firms, wages tend
to be more responsive to labor market conditions. In fact, while wage levels of regular
employees at large firms have been more or less unchanged, those at small and
medium-sized firms have been rising clearly. Similar trends have been observed in the
face-to-face services industry, where small and medium-sized firms account for the larger
share of total employment, and among younger workers, for whom job mobility is high,
including somewhat recent graduates who are looking for a new job.
Outlook for Wages
Bearing in mind these features of Japan's labor market, I would now like to describe the
outlook for wages. Basically, I believe that the growth rate of wages will increase gradually.
First of all, labor market conditions, particularly for non-regular employees, are projected to
tighten further. As Japan's economy recovers, labor demand is expected to increase,
particularly in the face-to-face services industry. On the labor supply side, labor force
participation of women and seniors is unlikely to increase to the same extent as has been the
case to date (Chart 12). The labor force participation rate of women in Japan has risen
markedly and has not only already exceeded that in the United States but is close to the
level of the top members of the Group of Seven (G7) countries. Moreover, while the labor
force participation rate of seniors has also risen, the baby boomer generation will eventually
pass the age of 75, and the labor force participation rate for those aged 75 and over is
significantly low. Thus, since labor market conditions are likely to tighten from both the
demand and supply sides, growth in wages of non-regular employees in particular is
expected to accelerate. Furthermore, this upward pressure on wages of non-regular
employees is likely to spread to wages of regular employees, especially those in small and
medium-sized firms and the face-to-face services industry, and among younger workers;
that is, to wages of regular employees for whom job mobility is relatively high.
However, in order for wage increases to become full-fledged from a macroeconomic
perspective, there needs to be a rise in wages of regular employees -- who account for the
larger share of total employment -- including wages of regular employees in large firms,
whose job mobility is relatively low. In next spring's labor-management wage negotiations,
attention will be focused on the extent to which prices will be reflected in wages, in addition
to the tightening of labor market conditions (Chart 13). In the past, labor and management
in Japan both shared the idea of ensuring that workers were paid a "living wage," and price
rises pushed up wages through increases in base pay. Base pay increases virtually
disappeared during the deflationary period, but these have been seen for nine consecutive
years since 2014, one year after the introduction of QQE. Given the rise in prices, the
Japanese Trade Union Confederation, or Rengo, has decided to demand in next spring's
labor-management wage negotiations an increase in base pay of 3 percent (excluding
seniority- and performance-related wage increases), which is higher than wage increases
demanded in the past, and I will be paying attention to how much base pay rises in practice.
In this regard, it seems that firms' wage-setting behavior has started to move in the direction
of taking price rises into account. Surveys suggest that managers of small and
medium-sized firms also appear to be raising wages based on a greater awareness of price
rises than in the past.
It should be noted that, while corporate profits -- the source of wage increases -- have been
at high levels on the whole, they vary across firms, depending on size and industry (Chart
14). It is also true that many managers of small and medium-sized firms say that, although
their firm's performance has not improved, they have raised wages as a "defensive" step. In
order for wage increases to spread in a sustainable manner, it is necessary for these to
become full-fledged, especially among large firms, for which profits have improved
significantly, and there need to be initiatives toward spreading the positive impact of
increased profits overall, particularly to small and medium-sized firms, through improved
business contract terms and other factors. In this regard, I am very encouraged by Chairman
Tokura's message regarding next spring's labor-management wage negotiations, in which he
stated that "prices should be the top priority among the various factors to be considered,"
and that it is desirable "to maintain the momentum of wage increases and realize a virtuous
cycle of prices and wages." Furthermore, an increasing number of firms are participating in
the Declaration of Partnership Building initiative, with the aim of building sustainable
relationships that allow large firms and small and medium-sized firms to grow together. I
hope that, through these efforts, moves to increase wages will spread throughout the
economy.
Concluding Remarks
Let me conclude. As I have discussed today, labor market conditions in Japan are projected
to tighten further, and firms' price- and wage-setting behavior is also likely to change. In
this sense, we are approaching a critical juncture in breaking out of the prolonged period of
low inflation and low growth since the collapse of the bubble economy. I would like to
close my speech today by expressing my hope that firms will continue to make progress
with their positive efforts, and by noting that the Bank will provide its utmost support by
firmly maintaining accommodative financial conditions.
Thank you for your attention.
Toward Achieving the Price Stability Target
in a Sustainable and Stable Manner,
Accompanied by Wage Increases
Speech at the Meeting of Councillors of Keidanren
(Japan Business Federation) in Tokyo
December 26, 2022
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
I. Recent Economic and Price Developments and
the Bank's Conduct of Monetary Policy
II. Characteristics of the Labor Market and Wage
Formation in Japan
Concluding Remarks
Chart 1
Introduction
Forecasts for Economic Activity and Prices
in Major Advanced Countries (IMF)
Inflation Real GDP Growth Unemployment Rate
y/y % chg.
y/y % chg. %
10 8 8
Forecasts
Forecasts Forecasts
Japan
6 7
8
G7 countries
other than
4 6
Japan
6
2 5
4 0 4
-2
3
2
-4 2
0
-6 1
-2 -8 0
CY 19 20 21 22 23 19 20 21 22 23
CY CY 19 20 21 22 23
Note: The forecasts presented are those as of October 2022. Figures for the Group of Seven (G7) countries other than Japan are the arithmetic averages of figures for Canada, France,
Germany, Italy, the United Kingdom, and the United States.
Source: IMF. 1
Chart 2
I. Recent Economic and Price Developments and the Bank's Conduct of Monetary Policy
Japan's Economy
Economic Activity by Sector The BOJ's Forecasts for Real GDP
s.a., ann., tril. yen
s.a., CY 2019 = 100
580
110
570
100
FY 2024
560
+1.5%
90
FY 2023
550
+1.9%
80
540 FY 2022
+2.0%
70
530
60
520
50
Manufacturing
510
Nonmanufacturing
Accommodations, eating and drinking services
40
500
Services for amusement and hobbies
Transport
30 490
FY 13 14 15 16 17 18 19 20 21 22 23 24
CY 20 21 22
Notes: 1. In the left-hand chart, figures for manufacturing are from the Indices of Industrial Production, while those for the other sectors are from the Indices of Tertiary Industry Activity.
Figures for nonmanufacturing exclude accommodations, eating and drinking services, services for amusement and hobbies, and transport.
2. In the right-hand chart, the forecasts presented are the medians of the Policy Board members' forecasts in the October 2022 Outlook for Economic Activity and Prices (Outlook Report).
The values of real GDP for fiscal 2022 onward are calculated by multiplying the actual figure for fiscal 2021 by all successive projected growth rates for each year.
Sources: Ministry of Economy, Trade and Industry; Cabinet Office; Bank of Japan. 2
Chart 3
I. Recent Economic and Price Developments and the Bank's Conduct of Monetary Policy
Prices
The BOJ's Forecasts for the CPI Crude Oil Prices
y/y % chg.
$/bbl
4 120
FY 2022
+2.9%
3 100
FY 2023 FY 2024
+1.6% +1.6%
2 80
1 60
Forward month
futures prices
0 40
-1 20
-2 0
FY 13 14 15 16 17 18 19 20 21 22 23 24 FY 13 14 15 16 17 18 19 20 21 22 23 24
Notes: 1. In the left-hand chart, figures are the CPI for all items less fresh food, excluding the effects of the consumption tax hikes, etc. The forecasts presented are the medians of the Policy
Board members' forecasts in the October 2022 Outlook Report.
2. In the right-hand chart, figures are futures prices of West Texas Intermediate (WTI). Figures through November 2022 are monthly averages, while the figure for December 2022 is
the average for December 1-22. Figures for forward month futures prices are those as of December 22, 2022.
Sources: Ministry of Internal Affairs and Communications; Bank of Japan; Bloomberg. 3
Chart 4
I. Recent Economic and Price Developments and the Bank's Conduct of Monetary Policy
Modification of the Conduct of Yield Curve Control (YCC)
Impact of Increased Volatility
Measures Decided by the Bank of Japan
in Overseas Markets
Deterioration in Japan's bond market functioning
Conduct of YCC
Relative relationships among interest rates of bonds with
different maturities
Encourage a smoother formation of
Arbitrage relationships between spot and futures markets
the entire yield curve
Significant increase in the amount of JGB purchases: from 7.3 trillion yen
per month to about 9 trillion yen per month
Possibility of a negative impact on financial conditions
Expansion of the range of 10-year JGB yield fluctuations from the target
Yields on Japanese government bonds (JGBs) are
level: from between around 0.25% pts to between around 0.5% pts
reference rates for corporate bond yields, bank lending
Nimble responses for each maturity:
rates, and other funding rates.
- Offer to purchase 10-year JGBs at 0.5% every business day through
fixed-rate purchase operations
JGB Yield Curve (Before the December 2022 MPM)
- Make nimble responses for each maturity by increasing the amount
of JGB purchases even more an