BoJ Meeting: Reinterpreting the 0% Target on the JGB Yield As a Floor?

Summary The Bank of Japan (BoJ) decided to allow the 10 year JGB yield to fluctuate around 0%. To sweep away speculation of a change in policy stance, the Bank introduced a forward guidance to keep the policy rates low for an extended period of time. Without being specific on how high the yield could rise, the BoJ arguably reinterpreted the 0% target on 10 year yield as a floor. With the forward guidance, the Bank is expected to maintain a status quo at least until the end of 2019 after the consumption tax hike. However, should higher import prices hurt consumers, it could tolerate the bond yield slightly above 0.1%, where the Bank recently attempted to prevent the JGB yield from rising further.