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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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MNI INTERVIEW: Ex-BOJ Official: Tweak 10-year JGB Target Range
Any move by the Bank of Japan to widen the trading band of the 10-year yield will help re-energise the JGB market, but the Board must be more explicit when guiding the daily discretion of officials in the markets division, a former senior BOJ official told MNI.
"The BOJ has prevented the 10-year yield from moving in a wide range, tying the rate to around zero percent. However, as the 10-yr JGB yield should reflect a multitude of economic and financial developments, policymakers should tolerate a wider range," Takashi Kozu, the president of the Ricoh Institute of Sustainability and Business, told MNI in an interview on Thursday.
Kozu suggested that the BOJ focuses on the average 10-year yield over the duration of each one-month reserve maintenance period, noting the central bank had previously tolerated such a plan for the unsecured overnight call loan rate to move more widely through a reserve maintenance period, targeting the weighted average as its policy stance in the past.
Echoing recent comments by former BOJ executive director Kenzo Yamamoto, Kozu said, "The board needs to give those in charge of daily operations a certain free hand but should not leave all decision making to these officials."
CHANGE PERCEPTIONS
Kozu also said that the BOJ must change market players' cemented perception that the BOJ anyway guides the 10-year interest rate at around zero even if the bank pledges to move the 10-year interest rate more widely.
"In the big JGB sea, the BOJ is similar to a whale but doesn't understand that it is. Under these conditions, even if the BOJ says markets should move flexibly and in a wider fashion, nobody believes its willingness and nobody wants to take risks," Kozu said.
In July 2018, the BOJ unofficially widened a range of 10-year interest rate to a range of plus or minus 20 basis points from a range of -0.1% to +0.1%.
As a result, the 10-year interest rate had temporarily moved in a wide range immediately afterward but reverted to around zero percent as the BOJ had guided the rate there through daily operations.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.