Governor of the Bank of Japan Kazuo Ueda speaks to journalists after meeting Japanese Prime Minister Fumio Kishida at the prime minister's official residence in Tokyo on April 10, 2023. Ueda said on May 9, 2023 the central bank will end its yield curve control policy and then start shrinking its balance sheet, once prospects heighten for inflation to sustainably hit its 2 percent target. (PHOTO / AP)
TOKYO – Bank of Japan (BOJ) Governor Kazuo Ueda said on Tuesday the central bank will end its yield curve control policy and then start shrinking its balance sheet, once prospects heighten for inflation to sustainably hit its 2 percent target.
Speaking in parliament, Ueda said Japan's economy was picking up and inflation expectations remain at high levels.
"We're seeing some positive signs in trend inflation, including inflation expectations," the BOJ chief said.
"When we can foresee inflation sustainably and stably meeting our 2 percent target, we will abandon yield curve control and then move towards shrinking the bank's balance sheet."
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Ueda, however, warned of various uncertainties on the outlook such as whether recent strong wage growth will be sustained, and spread to smaller firms.
Under yield curve control (YCC), the BOJ sets a short-term interest rate target of -0.1 percent and caps the 10-year bond yield around zero as part of efforts to durably hit its price goal.