Boj Is Expected To Tweak Ycc

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Boj Is Expected To Tweak Ycc

BoJ Is Expected To Tweak YCC Amid High Inflation

The recent inflation data has confirmed that the Bank of Japan will need to introduce changes to its yield curve control (YCC) policy. In addition, the Yen is at historic lows against its counterparts while the bond yields also continue to rise.

All of these factors point out the need for YCC tweaks in the upcoming weeks/months. According to experts, the central bank will continue to keep the rates at ultra-low levels. However, the bank will likely change the upper & lower limits of YCC bands.

This will allow the Bank of Japan to introduce some tightening into the economy that is currently enjoying a very lax monetary environment.

YCC New Range Is -1.5% To 1.5%

Furthermore, many media outlets are also reporting that the pressure is building up on BoJ to introduce the YCC policy tweak. Especially after October's bond sell-off, the need for such a move has increased tremendously.

For now, the 10-Y bonds from Japan are allowed to move in the range of -1 - 1% only based on the yield curve control. However, the yields for the 10-Y bond are now very close to the upper range of the YCC band. When checked last time, the yield for the 10-year bond was hovering near 0.89%, which is a historic high.

Throughout the month of October, the Bank of Japan had to intervene in the currency & bond markets to support the currency and the bond yields.

According to analysts from Bank of America, the new range for the YCC band will be between -1.5% - 1.5%. This means even the Bank of Japan is now anticipating the bond yields to turn higher.

Another change that's expected from the BoJ is the forecast for the GDP, as the Japanese economy is showing signs of resilience. During the first 2 quarters of the year 2023, the GDP growth was very satisfactory.

Despite the forecast for YCC tweaking, the interest rates in Japan will remain changed. So, on that front, we don't really expect any major change at all.

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