The International Monetary Fund (IMF) says the Bank of Japan's (BOJ) decision to adjust its yield curve control (YCC) program is a sensible move.
The BOJ surprised global markets on Tuesday after it allowed the 10-year yield to move to -/+ 0.5% from the previous limit of -/+0.25% in its range.
Head of the IMF's mission to Japan, Ranil Salgado said the adjustment of the BOJ's YCC setting was a reasonable step including concerns expressed about the functioning of the bond market.
He added, providing clear communication on the conditions for adjusting the monetary policy framework will help market expectations.
It also helps strengthen the credibility of the central bank's commitment to achieving its inflation target, said Ranil Salgado.
The sharp fallout from the BOJ's move was reflected in broader markets including US stock futures, the Australian dollar and gold.
Although Governor Haruhiko Kuroda said this move was to improve the functioning of the bond market, it was also interpreted by the market as a shift towards policy normalization under the next governor.
Kuroda will end his term as BOJ Governor in April 2023, and markets see it as the starting point for a change in the central bank's monetary policy.
