Bank of Japan Deputy Gov. Masayoshi Amamiya showed Monday a positive view of long-term interest rates moving more widely than currently assumed under the central bank's monetary easing policy. In his comments at the Yomiuri Economic Forum, held online, he said, "I think it would be fine if [long-term] interest rates move up and down more within the range where the effects of monetary easing are not impaired."
The Bank of Japan will review its policies at its monetary policy meeting to be held on March 18 and 19. It currently manages monetary policy to keep long-term interest rates at around 0% and allows for movements of about 0.2% up or down.
Long-term interest rates normally fluctuate depending on economic conditions. The BOJ keeps long-term interest rates low by purchasing Japanese government bonds, because if long-term interest rates rise, the cost of borrowing money will increase, which could have a negative impact on the economy. However, if interest rates remain low, it will lead to a deterioration in the profitability of banks, so balance is important.
Regarding exchange-traded funds, Amamiya said, "I would like to think about whether it is possible to manage them to maximize their effectiveness by boldly and aggressively purchasing them when necessary."
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