Bank of Japan meet Friday. BNP is expecting the BOJ to widen YCC to +/- 100 bps (from 50)

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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This article was written by Eamonn Sheridan at Source