Long-End Rally Strengthens Post-BoJ Decision

JGB futures gap higher after the BoJ delivered, as largely expected, no changes in policy, forward guidance or its explicit easing bias. There have also been no signals regarding the termination of the Negative Interest Rate Policy (NIRP). The upper bound reference on long-term yields was also maintained at 1%.

• In short, the BoJ sees the price trend to rise to goal toward the end of the projection period, with the risks more or less balanced for the economy and prices.
• In terms of forecasts, FY24 Core CPI has been downwardly revised to 2.4% y/y from 2.8% but FY25 has been upwardly revised slightly to 1.8% from 1.7% previously. FY24 & FY25 Core Ex-Energy CPI forecasts were left unchanged at 1.9%.
• A more hawkish development would have been if the 2025 forecast was at or above 2%.
• Cash JGBs have strengthened their twist-flattening, pivoting now at the 2s, with yields 1.4bps higher to 6.2bps lower. The benchmark 10-year yield is 2.0bp lower at 0.638% versus 0.648% at the lunch break.
• The swaps curve has bull-flattened, with rates flat to 4bps lower. Swap spreads are generally wider.