The Bank of Japan (BOJ) strongly signalled today that it intended to keep its ultra-loose monetary policy for now despite mounting evidence of economic strength that has pushed up bond yields to multi-year highs.
The central bank upgraded its assessment of the economy but, as expected, kept policy unchanged at the end of a two-day board meeting.
As yields on Japanese government bonds (JGBs) have surged on signs that the recovery is gathering momentum, markets were on the lookout for any faint signals that the BOJ was starting to consider a change in policy.
BOJ Governor Mr Toshihiko Fukui sought to squash such speculation, saying the central bank was not wavering in its commitment to fight deflation with an easy monetary policy.
The BOJ has pledged to maintain its easing framework until year-on-year changes in consumer prices stabilise above zero.
At the same time, Mr Fukui indicated he had no intention to put a lid on the recent rise in long-term interest rates, saying it reflected better economic conditions.