By Leika Kihara and Tetsushi Kajimoto
(Reuters) -Bank of Japan (BOJ) Governor Kazuo Ueda said on Tuesday there was still some distance to sustainably and stably achieving the central bank’s 2% inflation target, signalling his resolve to maintain ultra-loose monetary policy for the time being.
“We have patiently continued our ultra-loose monetary policy under yield curve control (YCC),” with due consideration to the impact on financial intermediation and market function, Ueda told a news conference after attending a G20 finance leaders’ meeting in India.
Ueda said the BOJ will scrutinise at each policy meeting the pace of progress Japan was making in sustainably achieving its 2% target.
“If our assumption (that sustained achievement of 2% inflation remains distant) is unchanged, our overall narrative on monetary policy remains unchanged,” he said.
His remarks came in response to a question on whether the central bank saw a need to tweak YCC at its rate review later this month.
Ad: Save every day with Amazon Deals: Check out today's daily deals on Amazon.
Under YCC, the BOJ guides short-term interest rates at -0.1% and buys huge amounts of government bonds to cap the 10-year bond yield around 0% as part of efforts to fire up inflation to its 2% target.
With inflation having exceeded its 2% target for more than a year, markets are rife with speculation the BOJ could tweak YCC as early as this month to address the mounting costs, such as market distortions, caused by its huge bond buying to defend the yield cap.
Sources have told Reuters the BOJ has been internally discussing the idea of tweaking YCC as early as this month, though the talks are preliminary and no final decision has been made.
(Reporting by Leika Kihara and Tetsushi Kajimoto in Tokyo; Editing by Bernadette Baum and Christina Fincher)