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Goldman Sachs On Japan Rates

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The US Banks weighs in on Japan Rates. BOJ remains data-dependent, keeping short positions on 5y JGBs as they maintained key policy parameters in April, with a slightly dovish tone observed from Governor Ueda during the subsequent press conference, indicating inflation risks likely to persist, particularly affecting 5y rates.
"BOJ data-dependent, stay short 5y JGBs on the curve. At its April MPM, the BOJ maintained its key policy parameters. The short-term rate was unchanged at 0-0.1%, and JGB purchases were kept in accordance with decisions in March, in-line with our expectations. Although Governor Ueda acknowledged the possibility of an eventual reduction in JGB purchases, he did not provide a timeline, while the removal of forward guidance on rates points to a more data-dependent approach from the BOJ in coming months. The accompanying outlook report carried upgrades to inflation forecasts for this year, but kept FY2025 inflation unchanged at +1.9% while introducing FY2026 core inflation also at +1.9%. Though the overall economic outlook was largely unchanged from the March meeting, Governor Ueda’s subsequent press conference was viewed as slightly dovish by market participants, in part due to built-up expectations of more hawkish policy guidance against the backdrop of Yen weakness. On the latter, Ueda indicated that the exchange rate is not a direct target of monetary policy, and that the BOJ will take a holistic view on the inflation outlook rather than focusing on the Yen specifically. Although this messaging suggests that imminent tightening is unlikely, it does mean inflation risk is likely to continue to build in Japanese rates, including in breakevens. We think this inflationary pressure will see 5y rates underperform on the curve."

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The US Banks weighs in on Japan Rates. BOJ remains data-dependent, keeping short positions on 5y JGBs as they maintained key policy parameters in April, with a slightly dovish tone observed from Governor Ueda during the subsequent press conference, indicating inflation risks likely to persist, particularly affecting 5y rates.
"BOJ data-dependent, stay short 5y JGBs on the curve. At its April MPM, the BOJ maintained its key policy parameters. The short-term rate was unchanged at 0-0.1%, and JGB purchases were kept in accordance with decisions in March, in-line with our expectations. Although Governor Ueda acknowledged the possibility of an eventual reduction in JGB purchases, he did not provide a timeline, while the removal of forward guidance on rates points to a more data-dependent approach from the BOJ in coming months. The accompanying outlook report carried upgrades to inflation forecasts for this year, but kept FY2025 inflation unchanged at +1.9% while introducing FY2026 core inflation also at +1.9%. Though the overall economic outlook was largely unchanged from the March meeting, Governor Ueda’s subsequent press conference was viewed as slightly dovish by market participants, in part due to built-up expectations of more hawkish policy guidance against the backdrop of Yen weakness. On the latter, Ueda indicated that the exchange rate is not a direct target of monetary policy, and that the BOJ will take a holistic view on the inflation outlook rather than focusing on the Yen specifically. Although this messaging suggests that imminent tightening is unlikely, it does mean inflation risk is likely to continue to build in Japanese rates, including in breakevens. We think this inflationary pressure will see 5y rates underperform on the curve."