(Bloomberg) — Bank of Japan Governor Kazuo Ueda indicated he’s not too concerned about the recent ascent of the nation’s benchmark yield to the highest since 2008, adding that only a sudden, exceptional spike might warrant action.
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“My understanding is that the rising trend since last year reflects the market’s views on the economy and inflation, or shifts in interest rates overseas,” Ueda said Wednesday morning in response to questions in parliament. “There is no major gap between our views and the market’s.”
When the topic came up again in the afternoon, the governor calibrated his message with the assurance that officials will act if absolutely necessary, although he declined to comment directly on recent moves. “If long-term yields rose sharply in a way that differs from normal market movements, we would conduct operations swiftly and flexibly to promote stable interest rate formation in the market,” he said.
The remarks suggest that while the BOJ is watching developments closely, it’s not likely to step into the bond market for now even after benchmark yields breached the key threshold of 1.5%, reaching 1.575% on Monday. The central bank ended its yield curve control program last year, and Ueda has consistently expressed his view that the market should determine yield levels.
“One of the biggest factors driving long-term yields is market expectations regarding the outlook for short-term rates,” Ueda said. “It’s natural for the yields to move by reflecting those views.”
The governor’s remarks come as the nation’s government bond yields continue to rise. The 20-year bond yield hit its highest since 2008 on Wednesday morning, while yields on 30-year debt climbed to the highest since 2006. Selling pressure on bonds temporarily increased after Ueda spoke.
With his comments, Ueda joins other Japanese authorities who have expressed relative calm over the recent rise in bond yields. Finance Minister Katsunobu Kato Tuesday said that there are both positive and negative effects from the moves.
The BOJ’s board gathers next week to set policy after lifting the benchmark rate to 0.5% in January. While few economists expect a move this month, Ueda has consistently said authorities would raise borrowing costs if their economic forecasts are realized.
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