BOJ to consider policy tweak to allow 10-year yields to exceed 1% — report

USD/JPY is falling on a Nikkei report.

The Bank of Japan is set to consider a further adjustment to its yield curve control (YCC) framework at Tuesday’s monetary policy meeting, potentially allowing 10-year Japanese government bond yields to rise above 1%, sources close to the matter told Nikkei.

The headline in the story says “BOJ to tweak policy again to allow 10-year yields to exceed 1%” but the text only says they will ‘consider it’. There is no talk of what ceiling, if any, could replace the policy but traders are speculating 1.25% or 1.50%.

There is much speculation on the BOJ decision tomorrow and I strongly suspect the dollar weakness on Friday was due to USD/JPY selling on a report about higher inflation forecasts. We saw another round of it today as USD/JPY longs clear out or central bank decision risk.

Today’s report also says the BOJ is also likely to more flexibly conduct its JGB purchase operations, citing sources.

The story cites the yen as a factor in the BOJ’s decision, saying that raising the YCC could help cap USD/JPY at 150.00, though it’s not clear if that’s speculation or sourced.

Aside from broader markets, there is fear that a sudden lift on yield curve control could further push up global yields.

This article was written by Adam Button at Source