Bank of Japan Monetary Policy Decision - 31 July 2023

Surprised the market by tweaking the conduct of YCC; highlights upside risks to inflation

Bank of Japan’s (BoJ) Ueda first surprise move. The BoJ kept the short-term policy rate at -0.1% and long-term interest rate target band at 0.5%. However, it shocked the market by enhancing the sustainability of monetary easing through greater flexibility in conducting Yield Curve Control (YCC).

An 8-1 majority vote on the conduct of YCC

  • The short-term policy interest rate: maintained a negative interest rate of -0.1% to the PolicyRate Balances in current accounts held by financial institutions at the bank.
  • The long-term interest rate: to purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit to keep the 10-year JGB yields at around 0.0%.