2 reasons for a Bank of Japan ‘tweak’ to yield curve control (YCC) at its July meeting

The inflation data from Japan for May indicated strong price growth still:

ING warn of more to come:

  • the current energy subsidy program will end in September and some power companies will begin to raise electricity fees again. Thus, we see headline inflation staying above 2% for a considerable time.

And a July (meeting is 27 and 28 of the month) policy change:

  • We think that the BoJ will upgrade its inflation outlook in July and a yield curve control (YCC) tweak is still possible despite the dovish comments from several board members.
  • They will probably justify their action by saying that a YCC tweak is not a tightening, but instead, that it is done to improve market functionality.
  • Another reason that we think a July tweak is possible is that a shift in YCC may need to come as a surprise to avoid a large bond selloff.

This article was written by Eamonn Sheridan at www.forexlive.com. Source