TOKYO, April 27 (Xinhua) -- The Bank of Japan (BOJ) on Monday expanded its easing measures for the second successive month in a bid to help fortify the economy against the downside pressure from the impact of the coronavirus pandemic.
In a move aimed at ensuring there is enough liquidity in financial markets to help maintain stability and curb potential spikes in yields, the central bank removed its annual cap of 80 trillion yen (746 billion U.S. dollars) on the amount by which it can increase its balance of holdings of government bonds.
With no ceiling on the purchase target, the BOJ will be able to buy government bonds as it deems fit to prevent long-term interest rates surging.
"By removing the bond-buying guidance, we clarified our intention to buy government bonds aggressively without setting a limit," BOJ Governor Haruhiko Kuroda told a press conference following the conclusion of the bank's policy setting meeting.
"As in other countries, Japan has taken massive fiscal stimulus measures. The BOJ is also undertaking powerful monetary easing. We will buy as many government bonds as necessary under YCC (yield curve control). We're buying government bonds as part of our monetary policy steps. But our measures and fiscal stimulus will also have a mutually reinforcing impact," Kuroda said.
He said it was not the BOJ's intention to monetize government debt, but rather maintain liquidity in the bond market, while keeping the yield curve stably low to achieve the bank's interest rate target.
Scrapping the annual ceiling comes in twine with the government passing an emergency economic package worth 117.1 trillion yen (1.09 trillion U.S. dollars), and the issuance of deficit-covering bonds to the tune of 23.36 trillion yen (218 billion U.S. dollars) to fund the package.
The central bank has remained committed to buying government bonds in a flexible manner so as to guide long-term yields at close to zero percent.
"We haven't veered away from our stance that excessive flattening of the yield curve is undesirable. But at a time like this, what's most important is to keep the yield curve stably low under YCC," the BOJ chief said.
The BOJ also decided to increase its target for corporate bond and commercial paper purchases from 7.4 trillion yen (69 billion U.S. dollars) introduced in March, to 20 trillion yen (186 billion U.S. dollars) in total until the end of September.
The central bank also announced that its new policy introduced in March enabling it to provide loans against corporate debt of about 8 trillion yen (74 billion U.S. dollars) as of the end of February as collateral at the interest rate of zero percent with maturity of up to one year, would be increased to 23 trillion yen (214 billion U.S. dollars) as of the end of March.
The BOJ, however, opted not to plunge its short-term interest rates further into negative territory, past the current level of 0.1 percent, amid concerns such a move would diminish profits at commercial banks.
"Our interest rate targets won't change just because the coronavirus pandemic subsides. Current interest rates will stay for quite a long time. That doesn't mean we will continue with our current policy forever," Kuroda said.
The bank's latest easing measures follow those instituted last month which was the first time the bank rolled out new measures in more than three and a half years.
Looking ahead, however, Kuroda said the bank stood poised to take more action if necessary.
"We won't hesitate to take additional monetary easing steps if needed. As for future policy options, we can expand the size of our asset buying or market operations, as well as cut interest rates. We will choose the most appropriate option at the time. We won't rule out interest rate cuts as a policy option," the BOJ chief said. Enditem
