Research Briefing | Jun 17, 2022

BoJ sticks to its yield curve control strategy

BoJ sticks to its yield curve control strategy

The Bank of Japan stuck to its monetary policy at today’s (17 June) meeting, maintaining current short-term policy rates at -0.1% and long-term rates at around 0%.

The BoJ’s new strategy of offering daily, unlimited fixed-rate JGB purchases had been working to defend the +/-0.25% range for 10yr JGB, with purchases lower than previously. Earlier this week, however, the BoJ bought a larger amount, showing its determination to protect the range.

What you will learn:

  • Meanwhile, ultra-long yields have been trending higher. We think this reflects an increase in supply, in addition to rising global yields. We expect that steepening pressure from the long end will calm down in H2 as the supply-demand balance improves.
  • The April CPI rose to 2.5% y/y – the highest rate since 2008 excluding VAT-induced spikes. Given the large declines in the yen since end-February and the lag in currency pass-through, core-CPI will likely rise higher in H2. Still, we don’t forecast sustained inflation, and expect wages to stay flat.
  • We see little chance of the BoJ adjusting its yield curve control strategy given high inflation will prove temporary and muted concerns about policy sustainability. A new communication strategy introduced in April also means we generally don’t expect the 10yr yield to stay above 0.25%.

Back to Resource Hub

Related posts

Post

Will Japan policy adjustments accompany the end of NIRP?

Markets appear to be increasingly converging with our forecast that the Bank of Japan will abolish its negative interest rate policy at the April meeting, but views diverge on whether any other policy adjustments will accompany the end of NIRP.

Find Out More

Post

Acceleration in digitalisation will keep a service trade deficit in Japan

We project Japan's services trade balance will remain in deficit over the coming years as a trend increase in the import of digital-related services will outweigh a rising travel services surplus that has been driven by inbound tourists.

Find Out More
japan street

Post

BoJ on hold ahead of wage negotiation results

The Bank of Japan left both short-term and long-term policy rates unchanged at Tuesday's meeting as widely expected. The BoJ was unlikely to change policy this time given the lack of clear evidence on Spring Negotiation pay rises, based on recent comments by the Governor.

Find Out More