Bank of Japan to closely watch bond market situation: governor

[BANFF, Canada] Bank of Japan Governor Kazuo Ueda said on Thursday the central bank will closely monitor the bond market amid surging yields on super-long Japanese government bonds.

“I would decline to comment specifically on short-term developments of interest rates, but of course we will closely watch the market,” he said.

Ueda made the comments in a news conference after attending a meeting of finance leaders from the Group of Seven major economies.

While diminishing prospects of a near-term rate hike have kept shorter-term yields stable, those on super-long Japanese government bonds (JGBs) soared to all-time highs this week amid calls from politicians for big fiscal spending.

The spike in yields comes at a delicate time for the BOJ, which will review next month an existing taper programme running through March, and come up with a plan for next fiscal year and beyond.

Worries also linger over the US fiscal outlook and demand for government debt. The US House of Representatives narrowly passed President Donald Trump’s tax bill, adding to worries about the country’s debt load.

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In the joint conference with Ueda, Japanese Finance Minister Katsunobu Kato said there were comments at the G7 meetings pointing to the need of ensuring fiscal health.

The G7 communique adopted on Thursday cited high public debt and increasing fiscal pressures, saying that raising long-term growth potential is essential to manage risks to fiscal sustainability.

On foreign exchange, Kato said there were no discussions beyond what was agreed in the communique, which said G7 reaffirmed existing commitments that exchange rates should be set by markets, and that excessive volatility in currency moves would hurt economic stability. REUTERS