TOKYO (Reuters) – Government officials who attended the Bank of Japan’s policy meeting in December were given a half-hour reprieve to call their ministries, meeting minutes showed, underlining the significance of the central bank’s decision to adjust its currency peg in the bond market.
At the December 19-20 meeting, the Bank of Japan maintained its ultra-easy monetary policy, but shocked the markets with a sudden policy change in Yield Curve Control (YCC) that allowed long-term interest rates to rise.
Monday’s minutes showed that before the nine-member board voted on the steps, government representatives had requested a 30-minute adjournment of the meeting.
According to the minutes, Governor Haruhiko Kuroda, in his capacity as chairman of the BOJ meeting, approved the request.
“The government understands that the matters discussed today are aimed at conducting monetary easing in a more sustainable manner with the aim of achieving the BoJ’s target rate,” a Finance Ministry official who attended the meeting was quoted as saying. The bank’s inflation target.
The minutes showed that another government representative belonging to the Cabinet Office urged the Bank of Japan to be cautious about the repercussions of rising inflation, supply constraints and market volatility on the Japanese economy.
The minutes showed that the representatives did not express opposition to adjusting the yield control or any other elements of the BoJ discussion.
Two government representatives—one from the Ministry of Finance and the other from the Cabinet Office—are legally entitled to attend BOJ policy meetings and express the government’s views on policy decisions, though they cannot cast a vote.
At a press conference on Monday, Finance Minister Shunichi Suzuki said he was briefed by a representative of the Ministry of Finance on the Bank of Japan’s expected decision during the delay period.
It is rare for government representatives to request adjournment at BoJ meetings, which only happens at times of major decisions such as changing monetary policy.
For example, the government was granted a reprieve during a meeting when the Bank of Japan introduced negative interest rates in January 2016, according to the minutes of that meeting.
Under the YCC, the Bank of Japan set the short-term interest rate target at -0.1% and the 10-year bond yield at around 0% with a small tolerance range.
At the December meeting, the range set around the 10-year yield target doubled to 0.5 percentage point higher and 0.5 percentage point higher, a move intended to smooth out market distortions caused by the Bank of Japan’s heavy bond buying.
(Reporting by Leika Kihara). Editing by Bradley Perrett and Jacqueline Wong
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