Bank of Japan pledges to stick with plan to kick-start economy

THE BANK of Japan vowed yesterday to take necessary steps to reduce volatility in bond markets that has threatened to jeopardise the government’s fight to end deflation and revive growth.

The central bank upgraded its assessment of the economy for a fifth straight month, saying it “has started picking up”, as Prime Minister Shinzo Abe’s policy prescription of aggressive fiscal and monetary stimulus has boosted sentiment and a weaker yen has halted a decline in exports.

As expected, the policy board voted unanimously to stick with April’s massive quantitative easing, in which it pledged to vanquish 15 years of entrenched deflation by doubling its Japanese government-bond holdings in two years as it expands the supply of money at an annual pace of ¥60 trillion to ¥70 trillion.

BOJ governor Haruhiko Kuroda vowed to take steps needed to reduce volatility in the JGB market, but he disappointed some bond investors by sticking with the strategy of leaving it to BOJ bureaucrats to address the problem by tweaking the bank’s market operations.