Government representatives attending a Bank of Japan policy meeting in December made a rare request to adjourn the meeting before the central bank stunned financial markets with its decision to expand the trading range for long-term bond yields, minutes showed Monday.
Governor Haruhiko Kuroda, who chaired the Dec. 19-20 meeting, accepted the request to break for 30 minutes made after the Policy Board discussed the idea of widening the band for 10-year Japanese government bond yields, which later led the yen and yield to surge as financial markets took it as an effective rate hike by the dovish central bank.
The meeting was adjourned from 10:51 a.m. to 11:28 a.m. on Dec. 20. One of the two government representatives in the meeting called for the BOJ to carefully explain the intent of the policy tweak, according to the minutes.
Finance Minister Shunichi Suzuki revealed Monday he was notified by the official who attended the December policy meeting of the BOJ decision to raise the bond yield ceiling before it was announced publically.
The nine-member Policy Board includes Kuroda, two deputy governors and six other members.
Two government representatives, one from the Finance Ministry and another from the Cabinet Office, regularly attend policy-setting meetings, though they cannot vote. On Dec. 20, senior vice finance minister Kozo Akino and Satoshi Fujimaru, senior vice minister of the Cabinet Office, were there.
It is rare for a policy meeting to be adjourned. The minutes do not say why the request for adjournment was made by the government representatives.
When the BOJ's Policy Board was debating the introduction of a negative rate policy in January 2016, government representatives also called for an adjournment and notified the then finance minister and economic revitalization minister of the imminent move. That break lasted 16 minutes.
The Policy Board unanimously decided last month to allow the 10-year yield to trade between minus 0.5 percent and 0.5 percent, wider than the previous range of minus 0.25 percent and 0.25 percent.
Board members debated the need to improve the functioning of the bond market after Japanese bond yields faced upward pressure from overseas yields that had trended higher amid an environment of global monetary tightening.
Some members said the central bank should "clearly explain" that the policy decision was aimed at making the current monetary easing program more sustainable, and did not represent "a policy change toward an exit from monetary easing."
While the central bank stuck to its accommodative monetary policy, it was necessary to "assess the balance between positive effects and side-effects" of monetary easing in the future, one member said.
Kuroda has said the widening of the yield trading band should not be linked to a rate hike or a shift toward tighter monetary policy.
In its January policy meeting last week, the BOJ defied market pressure and made no further tweaks, and the governor, whose term is set to end in April, dismissed the need to further expand the 10-year yield trading range.
The BOJ has set the short-term interest rate at minus 0.1 percent while guiding 10-year yields to around zero percent to keep borrowing costs extremely low in support of the economy.
