The Bank of Japan's push to keep borrowing costs low to cushion the economic blow from the coronavirus is coming at the expense of the country's lenders, which are already buckling under the strain of decades of ultra-low interest rates.
TOKYO - The Bank of Japan’s push to keep borrowing costs low to cushion the economic blow from the coronavirus is coming at the expense of the country’s lenders, which are already buckling under the strain of decades of ultra-low interest rates.
The BOJ’s experience underscores the inherent difficulty in managing yield curve control at the very time the policy - long a tool in Japan - is gaining more attention from central banks around the world as a way to fight the pandemic-sparked downturn. Japan has over 100 regional banks which focus on lending to companies in the areas they are based in. With close and long relationships with borrowers, they can play a key role in revitalising regional economies.
“It’s been tough for us under negative rates, so it would be really, really nice if the BOJ helps steepen the yield curve,” Tetsuya Kan, head of Kansai Mirai Bank, a regional lender based in Osaka, western Japan, told Reuters.The BOJ adopted YCC in 2016, pairing a below-zero short-term rate with a pledge to guide 10-year bond yields around zero.
A recent rise in super-long yields to a more than one-month high has drawn renewed market attention on the BOJ.
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