Ex Boj Official Predicts An End Or A Major Tweak To Ycc

Ex Boj Official Predicts An End Or A Major Tweak To Ycc by Andrew Blumer last updated on April 24, 2023

Ex-BOJ Official Predicts An End Or A Major Tweak To YCC

Ex-BOJ official Hiroshi Nakaso has recently given an interview with a newspaper in which he discussed the future of yield curve control.

According to Nakaso, the Bank of Japan will probably end or modify its current yield curve control policy. There are many reasons that warrant such a change from the BOJ, but the biggest one is a major drop in the profits of financial institutions.

Haruhiko Kuroda is the main known for these massive stimulus measures & we can't deny the fact that they helped the country get out of deflation. However, that policy still failed to achieve the central bank's target of 2%!

This led to a prolonged period of a highly accommodative policy which in turn caused a dysfunctional bond market and rising costs.

YCC Making Its Way Through The Japanese Economy

According to Nakaso, all of these side effects point towards one thing - Yield curve control is now making its way through the Japanese economy.

Based on this information, it becomes apparent that the new leadership of the Bank of Japan (BOJ) will not change this YCC at an appropriate time.

Once the YCC is out of the way, the focus will turn on starting the normalization of the central's bank policy. And the first agenda of that normalization will be ending the negative interest rates.

But for the negative interest rates to end, Japan's economy must show a rise in wages and an improvement in the output gap.

Once the central bank has confirmed that the recent momentum is enough to hit its 2% inflation target, a decision will be made by the BOJ.

For now, the YCC policy of BOJ has set the near-term interest rate fixed at -0.1%, and the 10-year bond yields are also capped near zero.

But for all of this to happen, the BoJ leadership change must happen, and now it is only a matter of a few weeks, if not days!