Research Briefing | Nov 2, 2023

BoJ to allow 10-year JGB yields to exceed 1%

The Bank of Japan (BoJ) left short- and long-term policy rates unchanged at -0.1% and around 0%, respectively, at the meeting on Oct.31. However, the BoJ decided to tweak the yield curve control (YCC) policy by setting the upper bound of 1% as a reference and by making its Japanese Government Bond (JGB) purchase operations more flexible not to rigidly defend the bound.

What you will learn:

  • The BoJ’s quarterly Outlook Report revised the median forecast for CPI (excluding fresh food and energy) to 3.8% from 3.2% for FY2023.
  • Although we project that a wage settlement next year will be almost as high as the 3.6% increase this year, our inflation forecast is still lower than that of the BoJ.
  • We project that the BoJ will end its negative interest rate policy (NIRP) in April after confirming a reasonably high wage settlement, likely arguing that the economy is on track to stably achieve the 2% inflation target in the coming years.
  • Based on our growth and price forecasts, we still believe that the zero-interest rate policy will continue at least for a few years.
Back to Resource Hub

Related Posts

Wage rises in 2024 look set to be as high as this year


Wage rises in 2024 look set to be as high as this year in Japan

More market participants appear to have become confident that the wage-driven inflation is real, which will encourage the Bank of Japan to start normalizing its super-accommodative monetary policy in 2024. We revised up our projection for the spring wage settlement in 2024 to match the strength of the settlement in 2023. We believe that wage increase will continue after 2025, but achieving wage-led 2% inflation is still a long way off.

Find Out More
BoJ will continue effective zero interest rate policy anyway


BoJ will continue effective zero interest rate policy anyway in Japan

The Bank of Japan (BoJ) maintained the policy rates at its September meeting, following a tweak in its yield curve control policy in July. Although this decision was widely expected, the markets are starting to speculate policy changes within the coming quarters, especially after the BoJ governor's recent interview.

Find Out More


The BoJ will conduct YCC policy with greater flexibility

Despite today's (28th July) surprise tweak to YCC policy, we continue to believe that Governor Ueda is determined to avoid premature tightening and will spend another year or so to carefully assess whether the economy is on track to achieve 2% inflation within his five-year term.

Find Out More