MNI BRIEF: BOJ Summary Shows Corp Bonds, Swap Market Concerns

One Bank of Japan board member saw the need to improve market functioning in the corporate bond and swap markets, although changes to yield curve control were judged to have been effective to a certain extent, according to the summary of opinions of the March 9-10 meeting released by the BOJ Monday.

Members said it would take time to understand the impact of widening the band around the BOJ's zero percent 10-year yield target from 25bp to 50bp in December.

“It will still take time to examine the effects that the modification of the conduct of yield curve control has on market functioning,” another member said.

“Nevertheless, when the observed CPI inflation declines and market projections of interest rates in turn calm down, distortions on the yield curve are expected to be corrected,” the member said.

A different member said “the shape of the yield curve is generally smoother than a while ago, due in part to modifications of the conduct of the Funds-Supplying Operations against Pooled Collateral and the Securities Lending Facility.”

“However, market developments, including the impact of the Bank's various measures, should continue to be carefully monitored,” the person added.

Another member said “although Japan's economy has exhibited signs of a virtuous cycle, the Bank needs to carefully consider and discuss whether to revise its monetary policy, since such revisions affect financial markets and a wide range of economic entities.”