By Leika Kihara
TOKYO (Reuters) – The Bank of Japan’s decision in July to make its policy framework more sustainable is a welcome move but bond yields have not risen much since then, the head of the country’s banking industry said on Thursday.
Koji Fujiwara, chairman of the Japanese Bankers Association, said the BOJ’s move in July took into account concerns held by commercial banks that prolonged ultra-low interest rates were straining Japan’s banking system.
But bond yields remain very low, he said, noting the central bank has introduced a new guidance pledging to keep rates low for an extended period.
“If powerful monetary easing were to continue for a prolonged period, more scrutiny would be needed on whether this could hurt consumers’ sentiment and weigh on growth,” Fujiwara told a news conference.
With inflation distant from its 2 percent target, the BOJ has been forced to maintain its massive stimulus programme despite the rising costs near-zero rates, such as the hit to bank profits.
The central bank has faced criticism from the banking industry about the diminishing returns of its policy.
Mindful of such criticism, the BOJ took steps in July to make its policy framework more sustainable, such as allowing bond yields to move more flexibly.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim & Shri Navaratnam)