TOKYO - Japan's financial indiscipline amid rising inflation may disrupt its bond market, a senior executive of top lender Mitsubishi UFJ Financial Group said, in the wake of market expectations of an eventual end to ultra-low interest rates.
While the central bank maintains its ultra-loose monetary policy based on its assessment that sustained 2% inflation is yet to be achieved, the government looks poised to further expand spending meant to cushion the impact of inflation, Hiroyuki Seki, the head of MUFG's global markets business, told Reuters."I think the situation is making bond market players increasingly worried.
As these factors together raise the risks of policy responses being"behind the curve", the BOJ could move to end negative interest rates as early as in January, when the prospect of wage increases at major companies becomes clear, he said.The BOJ applies a -0.1% interest rate on a small pool of excess reserves financial institutions park with the central bank under its negative rate policy. It also guides the 10-year government bond yield around 0% with a hard cap of 1.
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