BNPP forecasts a move from the Bank of Japan (BoJ) to adjust the Yield Curve Control (YCC) range for the 10-year rate to ±1% in its 27-28 July meeting.
While the BoJ might present this decision as a measure to manage risks related to financial intermediation and not as a sign of monetary tightening, BNPP identifies other influencing factors.
Key Points:
1. YCC Band Adjustment: BNPP anticipates the BoJ will increase the YCC range for the 10-year rate to ±1% in its imminent meeting.
2. Boys justification: The central bank is expected to attribute this change to mitigating risks associated with financial intermediation, emphasizing that it isn’t a shift towards monetary tightening, especially given the recent rise in inflation expectations.
3. Underlying Reasons: BNPP perceives the primary motivations for this decision to be the BoJ’s concerns regarding further potential depreciation of the yen and evolving inflation expectations.
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