The government expressed concern Tuesday that long-term interest rates were rising “too fast,” and urged the Bank of Japan to dispel market concerns about a further credit-tightening.
“The current pace of interest rate hikes seems to be rather too fast,” Chief Cabinet Secretary Shinzo Abe said at a news conference after the yield on the bellwether 10-year government bond briefly touched 2.0 percent for the first time in six years and eight months.
Market speculation that the central bank may steadily tighten its grip on credit is seen as behind the surge in long-term rates, and the BOJ should “carefully explain” its policy stance, Abe said.
The government’s top spokesman also urged market participants to pay due regard to the BOJ’s policy decisions “in a level-headed manner.”
“Under a situation in which deflation continues mildly, rises in interest rates have adverse effects on the economy and are undesirable,” he said. “The government will continue to monitor interest rate moves from the viewpoints of economy and finance.”
Finance Minister Sadakazu Tanigaki made similar comments earlier in the day as the bond yield, which serves as the benchmark long-term rate, approached the 2 percent threshold.
Although the BOJ said after it scrapped its so-called quantitative easing policy on March 9 that it would maintain an accommodative monetary stance for the time being, the market has yet to understand the message, Tanigaki said.
The surge in long-term rates reflects expectations that the economy will soon emerge from deflation, leading the central bank to raise interest rates in the near future, traders said.
Meanwhile, Tanigaki said the rise of interest rates in major industrialized nations and its impact on the global economy, particularly emerging economies, is likely to top the agenda at a one-day meeting in Washington on Friday of top finance officials from the Group of Seven industrialized nations. The finance ministers and central bankers are also likely to discuss high crude oil prices.