Expect the BoJ to keep YCC unchanged despite rising global yields – Danske Bank

According to Morten Helt, Senior Analyst at Danske Bank, with global yields increasing, growth in Japan above trend and potentially rising inflation expectations in the country, the BoJ’s willingness to maintain its yield curve control (YCC) policy, through which it targets both the policy interest rate and the10-year yield on Japanese government bonds, could be tested by the market this year.”

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 “However, given the BoJ’s commitment to delivering 2% inflation and because we think it will be difficult for the BoJ to lift its target for the 10-year yield without sending tightening signals to the market, we expect the BoJ to keep its policy unchanged throughout our12month forecast horizon and possibly for the rest of Haruhiko Koruda’s current term as BoJ governor, which ends in April 2018.”