BOJ announce no change to yield curve control (YCC) and no monetary policy change

Bank of Japan monetary policy decision and statement – says will manage YCC more flexibly but maintains 0.5% band.

  • Maintains short-term interest rate target at -0.1%
  • Maintains 10-year
    JGB yield target around 0%
  • Maintains band
    around 10-year JGB yield target at up and down 0.5% each

Raised their inflation forecasts for this year, but not the next:

  • Core-core CPI fiscal 2023 median forecast at +3.2% vs +2.5% in April
  • Core-core CPI fiscal
    2024 median forecast at +1.7% vs +1.7% in April
  • Core-core CPI fiscal
    2025 median forecast at +1.8 % vs +1.8% in April


  • Will guide yield curve control more flexibly
  • Appropriate to
    heighten sustainability of monetary easing
  • Will operate yield
    curve control more flexibly to respond nimbly to upside, downside
  • Will keep offering
    fixed-rate operations for 10-year jgb yield at 1.0%
  • In order to
    encourage formation of yield curve that is consistent guideline, BOJ
    will continue with large-scale jgb buying and make nimble responses
    for each maturity
  • For example, by
    increasing amount of JGB buying and conducting fixed-rate purchase
    ops and funds-supplying ops against pooled collateral
  • There are extremely
    high uncertainties for Japan’s economy, prices
  • Must pay attention
    to financial, fx markets and their impact on Japan’s economy, prices
  • Japan’s consumer
    inflation higher than projected in April outlook report


  • Wage growth has risen, signs of change have been seen in firms’ wage,
    price-setting behaviour
  • Inflation
    expectations have shown some upward movements again
  • If upward movement
    in prices continue, effects of monetary easing will strengthen
    through decline in real interest rates
  • Strictly capping
    long-term yields could affect bond market functioning, volatility in
    other markets
  • Such effects are
    expected to be mitigated by conducting yield curve control with
    greater flexibility
  • If downside risks to
    economy materialise, effects of monetary easing will be maintained
    through decline in long-term yields under yield curve control

BOJ quarterly report:

  • Risk to inflation
    skewed to upside for fiscal 2023, 2024
  • Japan’s economy is
    recovering moderately
  • Inflation
    expectations showing signs of heightening again
  • Japan’s economy
    likely to continue recovering moderately
  • Japan’s economy to
    continue expanding above potential
  • Japan’s consumer
    inflation likely to slow pace of increase, then re-accelerate as
    inflation expectations, wages rise

Bolding above is mine. The Bank has given a very minor YCC concession, saying they’ll manage it more flexibly. I don’t know what that means, but on face value it’s a nod to those calling for a wider band. Perhaps we’ll see that in the weeks ahead but I am only guessing without more detail from the Bank. The Bank made a point of saying the 0.5% either-way band is still in place but left themselves some flexibility to widen it on a day to day basis to 1%. The Bank could do with some communication lessons. it appears the +/-0.5% is still in place, but there is a ‘maybe’ to take it to +/-1%. Sheesh.

There was a dissenter. BOJ makes decision on YCC by 8-1 vote:

  • Board member
    Nakamura dissents to decision on YCC
  • Nakamura dissents to
    decision on YCC, considering it was desirable to allow greater
    flexibility after confirming rise in firms’ earnings power from
    sources such as financial statements statistics
  • Nakamura dissents to
    decision on YCC but in favour of idea of conducting YCC with greater

Nakamura in favour of getting on with a move towards more flexibility for yields. It appears he was arguing for a firm move to +/- 1%, not this wishy-washy ‘maybe 1%’ if wiggle room is needed. The longer the Bank of Japan sticks to +/-0.5% the more painful it’ll be for them when they do capitulate. And they will.

Bank of Japan Governor Ueda holding back the wave of calls for a tweak. Ueda’s press conference is next, coming at 0630 GMT, 0230 US Eastern time.

This article was written by Eamonn Sheridan at Source