Yield Curve Control Explained
The BOJ utilizes yield curve control, applying a -0.1% interest rate on a limited pool of financial institutions' reserves. Additionally, the central bank guides the 10-year bond yield around 0% to support its long-term goal of a 2% inflation rate.
Potential Risks to the Banking System
Kuroda cautioned that while deeper negative short-term rates are possible, cuts to -2% or -3% could lead to significant disruption in the banking system, making such moves difficult to implement.
Importance of Government Bond Purchases
The BOJ Governor emphasized the need to continue purchasing government bonds, noting that lowering short- and long-term interest rates cannot solely rely on deepening negative short-term rates.
Kuroda's Upcoming Retirement
Haruhiko Kuroda is set to retire after completing his second five-year term as BOJ Governor in April.