TOKYO: The Bank of Japan will discuss allowing long-term interest rates to rise above its 0.5% cap by a certain degree on Friday, when it concludes a two-day rate review, the Nikkei newspaper reported.
The move would be intended to fix distortions caused in markets by the central bank's heavy bond buying, the paper said.
Under yield curve control (YCC), the BOJ guides the 10-year bond yield around 0% and sets an allowance band of 0.5% above and below that target.
BOJ to keep ultra-low rates, may debate fine-tuning yield cap
Under the new idea to be proposed at the meeting, the BOJ would maintain the 0.5% cap but allow the 10-year yield to rise above that level depending on market developments, the Nikkei said without citing sources.
The BOJ will likely add steps to ensure it can avoid any abrupt rises in long-term interest rates, the paper said.
Sources have told Reuters the BOJ will likely maintain YCC but may debate making minor tweaks to the policy if it feels the cost outweighs the benefits.
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