BOJ Leaning Towards Keeping Yield Control Steady Next Week (RTRS Sources)

The latest RTRS sources piece notes that “the Bank of Japan is leaning towards keeping its yield control policy unchanged at next week's meeting, as policymakers prefer to scrutinise more data to ensure wages and inflation keep rising.”

• “But there is no consensus within the central bank on how soon it should start phasing out stimulus, which could make next week's decision a close call.”
• "Inflation is accelerating more than expected. But the key is whether the increase is sustainable, which will depend largely on corporate profits and next year's wage outlook,"
• "YCC needs to end at some point. But the timing is probably not now. There are signs of change in Japan's deflationary mindset. But it's still sentiment-driven rather than something substantial."
• “Even if the BOJ were to make tweaks, it would likely be a minor fine-tuning to make YCC sustainable.”
• “In fresh quarterly projections due after the meeting, the board is likely to revise up its core consumer inflation forecast for the year that began in April.”
• “But the forecasts for fiscal 2024 and 2025 will likely remain largely unchanged from current projections.”