By Leika Kihara
TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda on Wednesday refrained from issuing a fresh warning against recent rises in bond yields, saying they were a natural reflection of market expectations of future interest rate hikes by the central bank.
“Long-term interest rates move on various factors. But the biggest determinant is the market’s forecast on the outlook for our short-term policy rate,” Ueda told parliament on Wednesday.
“It’s natural for long-term rates to move in a way that reflects such market forecasts,” he said.
Ueda said he saw no big divergence between the BOJ’s view and that of markets, when asked about the recent steady rise in bond yields.
Japanese government bond (JGB) yields have risen to more-than-a-decade highs this week on expectations the BOJ could raise rates more aggressively than initially expected due to prospects of bumper wage hikes this year.
The benchmark 10-year yield hit a 16-year high of 1.575% on Monday, before sliding to 1.525% on Tuesday as investors sought safe-haven debt in the wake of sharp falls in U.S. and Japanese stock prices.
The BOJ raised short-term interest rates to 0.5% from 0.25% in January, reflecting its conviction that Japan was making progress in sustainably achieving its 2% inflation target.
Governor Ueda has signaled his readiness to keep raising interest rates if wages continue to increase and support consumption, allowing firms to continue hiking pay.
(Reporting by Leika Kihara; Editing by Tom Hogue and Sam Holmes)
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