In a recent development, Kazuo Momma, former Bank of Japan official and current senior economist at Mizuho Research & Technologies, anticipates that the Bank's board will deliberate over modifications to forward guidance and yield curve control (YCC) at their October meeting. This comes as Japan's long-term yields linger at 0.8%.
The discussions are expected to encompass several potential changes, including raising the daily fixed rate operation from 1%, adjusting the target for 10-year bond yields, or pushing the upper limit higher. These proposed modifications are intrinsically tied to the ongoing negative rate and YCC, which are both linked to the unachieved 2% inflation target set by the Bank.
Momma's prediction suggests that the Bank of Japan is actively considering strategies to manage its monetary policy more effectively amidst the challenges posed by low inflation. The anticipated debate on forward guidance and yield curve control signifies a potential shift in the Bank's approach towards achieving its inflation target.
The outcome of this meeting could have significant implications for Japan's financial markets, particularly if it results in changes to the daily fixed rate operation or adjustments to the 10-year bond yield targets. As such, investors and market participants will be closely watching these developments.
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