By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters – The Bank of Japan does not intend to permit long-term interest rate to rise beyond its 0% target.

In order to protect a implicit 0.25% ceiling around its target of 0%, the BOJ is offering to purchase unlimited quantities of Japanese 10-year government bonds (JGB), and maintain a dovish strategy as part of its efforts to reduce the economy.

Market speculations that the BOJ might increase the 50-basis point band to allow for further increases in long-term rates have prompted sharp falls in the Japanese yen.

Shinichi Umachida, BOJ Executive Director, said that the organization does not plan on expanding its band. He said, “Doing this would be tantamount of an interest rate rise” which is not good for the economy.

These comments highlight BOJ’s resolve not to cancel its enormous stimulus programme or keep extremely low interest rates. This could cause further weakness of the yen.

On Monday, the yen fell to an all-time low of 131.34 dollars per dollar. It then recovered to 130.10 by Tuesday. The BOJ’s policy is in direct opposition to global monetary tightening. The rates were raised by the central banks of Australia, Britain, and the United States last week.

Uchida still stated that recent sharp movements in the yen are not desirable, which was also supported by Shunichi Suzuki, Finance Minister.

Suzuki said Tuesday that stability was important, and that rapid moves such as were seen recently were unfeasible.

In response to the rapidly falling yen, he said Japan would closely cooperate with the United States (USA) and all other Group of Seven countries (G7).

When asked whether Japan could intervene to curb yen drops, he refused to respond.

According to the G7, exchange rates must be decided by markets. Disorderly movements may harm economies. Countries will discuss any currency market actions.

A weak yen was once welcomed by Japan’s exporters for its ability to boost their sales. However, it has become a concern for Japanese policymakers because it increases already high fuel import prices.

But, in spite of complaints from lawmakers, BOJ Governor Haruhikokuroda stressed that a weakening yen was beneficial to the economy and would not lead to a rate increase.