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BOJ Governor Ueda Clarifies JGB Purchases for Inflation Target, Not Debt Monetization

Bank of Japan (BOJ) Governor Kazuo Ueda stated on Tuesday that the central bank's purchase of Japanese government bonds (JGBs) is focused on achieving its 2% inflation target rather than monetizing debt.

Kazuo Ueda
Kazuo Ueda

No Intention to Support Government Funding

Ueda explained to the lower house financial committee of Parliament that the BOJ's JGB purchases are driven by monetary policy, and there is no intent to assist the government in acquiring financial resources.

BOJ's Yield Control Policy and Quantitative Easing

The central bank's approach includes purchasing significant JGBs and risky assets like exchange-traded funds and real estate investment trusts as part of its yield control policy and quantitative easing efforts.

Ueda Addresses Fiscal Concerns in Parliament

In his first appearance before parliament since taking office on April 9, Ueda faced fiscal issues as Japan sought funding to double defense spending due to increasing security concerns involving China and North Korea.

Possible Extension of Redemption Rule

Some ruling party lawmakers are considering extending the 60-year redemption rule for government debt to 80 years to create more fiscal space.

Ueda's Stance on Fiscal Management

Ueda refrained from commenting on fiscal management, stating that it falls under the government's and parliament's jurisdiction.

Market Interest Rates Influenced by Various Factors

According to Ueda, market interest rates are determined by multiple factors, such as the economy, prices, market sentiment, and JGB supply-demand balance.

Impact of Redemption Rule Review Unclear

Ueda mentioned that it would be challenging to predict the impact of a potential review of the redemption rule.

Finance Ministry's Position on Redemption Rule

During the same parliamentary session, Finance Minister Shunichi Suzuki stated that the finance ministry is not considering reviewing the debt redemption rule.