28 Jul 2023

There it is. The BoJ adjusts Yield Curve Control (YCC)

Japan’s central bank on Friday pledged greater flexibility in yield curve control policy, while keeping its ultra loose interest rate intact and revising its median consumer inflation forecast upward for the current fiscal year. - The Bank of Japan added it will offer to purchase 10-year JGBs at 1% every business day through fixed-rate operations, unless no bids are submitted — a move that effectively expands its tolerance by a further 50 basis points. - In a policy statement, the Bank of Japan said it will “continue to allow 10-year JGB yields to fluctuate in the range of around plus and minus 0.5 percentage points from the target level.” - “While it will conduct yield curve control with greater flexibility, regarding the upper and lower bounds of the range as references, not as rigid limits, in its market operations,” it added. - Still, the BOJ held its short-term interest rate target at -0.1% after a two-day meeting. It also raised its median forecast for inflation to 2.5% for fiscal 2023 after its July meeting, up from its 1.8% prediction in April. Market reaction? The Japanese yen strengthened and 10-year JGB yield rose after the Bank of Japan statement: - Yields for 10-year Japanese government bonds rose to 0.575% for the first time since September 2014. - The yen was trading at 138.64 against the dollar at 12:35p.m. Hong Kong and Singapore time. Source: Viraj Patel, CNBC, Bloomberg


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