BoJ is reportedly leaning towards keeping its yield control policy unchanged at the upcoming meeting, via Reuters citing sources

• No consensus within the BoJ on how soon it should begin phasing out stimulus; many policy makers see no imminent need for fresh steps given the 10yr yield is trading stably within the 0.50% cap. Adding, BoJ can wait until there is more clarity on whether a hard landing can be avoided and allow for further wage increases next year.


• Sources add, YCC needs to end at some point. Though, the timing is not now.


• Another source said even if tweaks were made, likely be a minor fine-tuning to make YCC sustainable.


• Expected to revise up core inflation forecasts for FY23, via source; though, FY24 & FY25 expected to be largely in-line with current projections.

Reaction details (08:33)

• Over the course of two-minutes, a dovish reaction has been seen with USD/JPY spiking higher from 140.23 to 140.40; given the inference that the BoJ would firstly tweak the YCC band before eventually abandoning the measure and then moving to a rate increase. Additionally, JGB Sep'23 spiked jumped from 147.77 to a high of 148.61 over a 10-minute period.


• Subsequently, around eight minutes after the initial JPY reaction the move extended to 140.78 which coincided with Bloomberg running a similar sources piece, which is available here.

45-minutes later

• 
  USD/JPY to a 141.67 peak, from the initial 140.23 pre-release level.


• 
  JGB Sep'23 lifted to a 148.63 high, from the initial 147.77 pre-release level.

Analysis details (08:30)

• Next BoJ meeting is July 28th.


• Overnight, there was a Reuters poll that showed 77% of economists think the BoJ will not start unwinding ultra-easy monetary policy in July; Economists are split on whether Japan's 2024 wage growth remains sufficient for BoJ policy normalisation. 50% of economists say BoJ will start phasing out stimulus this year (vs 64% in the June poll).

21 Jul 2023 - 08:25- Fixed IncomeImportant- Source: Reuters