Bank of Japan's monetary easing measures will continue to put downward pressure on long-term interest rates, Policy Board member Ryuzo Miyao said Tuesday.
The purchase of JGBs will absorb those securities circulating in the market, he said in a speech in Tokyo.
But at the same time, as expectations for economic recovery and inflation rise, the expected short-term interest rates will gradually increase, putting upward pressure on long-term rates, Miyao noted. Rates will also be influenced by a steady recovery in the U.S. and overseas economies and a rise in long-term interest rates overseas, according to the policymaker.
"Even when there is upward pressure on long-term interest rates due to expectations for economic recovery, monetary policy will continue to put downward pressure on interest rates, and therefore strongly support economic recovery," Miyao added.
He said the bank has been carefully examining developments in the bond market and closely communicating with market participants. Further, BoJ continues to pursue flexible market operationsby adjusting the frequency, pace, and scope of purchases, as necessary, he added.
"What matters is to ensure that long and short-term interest rates as a whole will follow a stable path," Miyao said.
Last week, the benchmark 10-year Japanese government bond yield jumped to its highest level in a year. The central bank responded by injecting JPY 2 trillion funds into the system and also by reaffirming its pledge maintain flexibility in bond purchases.
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