The Bank of Japan vowed on Wednesday to take necessary steps to reduce volatility in bond markets that has threatened to jeopardise the government's fight to end deflation and revive growth.
The central bank upgraded its assessment of the economy for a fifth straight month, saying it "has started picking up," as Prime Minister Shinzo Abe's policy prescription of aggressive fiscal and monetary stimulus has boosted sentiment and a weaker yen has halted a decline in exports.
As expected, the policy board voted unanimously to stick with April's massive quantitative easing, in which it pledged to vanquish 15 years of entrenched deflation by doubling its Japanese government-bond holdings in two years as it expands the supply of money at an annual pace of 60 trillion ($583 billion) to 70 trillion yen. While the government's aggressive policies have sent stocks soaring to 5-1/2-year highs and the yen tumbling to a 4-1/2-year low against the dollar, turmoil in the Japanese government-bond market in recent weeks has cast a cloud over the effectiveness of the BoJ's easing, a key element of "Abenomics" that is showing early signs of lifting the world's third-largest economy from a two-decade funk.
