Future Options for BOJ 10-Year Yield Are Said to Include a Range

The Bank of Japan could consider adopting a range for its 10-year bond yield target when it eventually looks to increase rates or needs to manage market volatility, according to people with knowledge of discussions at the central bank.

While any change is still far away and no adjustments are expected out of this week’s board meeting, having a range for the longer term yield goal may come under consideration at some point, said the people, who asked not to be named because the talks were private. Although the BOJ remains confident about managing the yield curve for now, a range could be considered in the future if it finds present measures insufficient to quell volatility, according to the people. 

The central bank currently targets a yield of about zero percent for 10-year Japanese government bonds. It has allowed for fluctuation around this point, but hasn’t indicated how much variation it is comfortable with.

All 41 economists surveyed recently by Bloomberg forecast no change at a policy board meeting March 15-16.

Some officials at the BOJ are concerned about market speculation on the rate and will consider giving more forward guidance in the future once inflation picks up, people familiar with discussions inside the bank told Bloomberg last week.

Core consumer prices rose 0.1 percent in January, snapping 10 months of declines. With oil prices higher than a year ago and a relatively weak yen, the officials expect the benchmark inflation gauge to be around 1 percent later this year.

They emphasize that the BOJ needs to look beyond any temporary factors boosting prices, and that what matters to the central bank is firm momentum to reach the 2 percent inflation target, people familiar with the matter have told Bloomberg.

Read more: Possible guidance to come once CPI picks up.

The BOJ’s meeting this week concludes soon after a Federal Reserve meeting, where a rate hike is widely expected. BOJ officials’ view that no policy action is needed now reflects recent stability in financial markets and economic data indicating the economy is recovering, according to the people.