MNI BRIEF: L/T Rate Unlikely To Rise Above 1% "Sharply" - Ueda

Bank of Japan Governor Kazuo Ueda said on Tuesday he does not expect the long-term interest rate to rise sharply above the 1% reference.

He told reporters the BOJ must preemptively increase yield curve control's flexibility amid high uncertainty over economic and price conditions. He noted the rise in U.S. interest rates had driven the increase in the long-term interest rate, but the BOJ's upward price revision had also contributed to the board's decision.

The BOJ board kept its policy settings largely unchanged today, however, it shifted its language on the 1% upper bound of its 10-year interest rate to refer to it as a reference point in its market operations. (See MNI BRIEF: BOJ Keeps YCC, 1% 10-Year JGB Yield As Reference)

Ueda indicated Tuesday’s decision included measures to address the side-effects of the easy policy in bond and foreign exchange markets.

He said appropriately assessing market moves on a daily basis was difficult, when pressed on whether the BOJ's long-term interest rate restrictions caused speculation.

The BOJ expects underlying CPI to increase gradually toward its 2% target if accompanied by an intensified virtuous wage and price cycle. Ueda, however, doubted whether sufficient strength of the virtuous cycle existed.