Mixed Ahead Of Today’s BoJ Policy Decision

In Tokyo morning trade, JGB futures have slightly added to overnight weakness, -13 compared to settlement levels, ahead of today’s BoJ Policy Decision.

• Our analysis aligns with the prevailing consensus, which once again foresees the BoJ keeping all key targets and YCC parameters unchanged. Despite previous surprises in July and October, coupled with December last year, indications suggest a different outcome this time. The likelihood of the BoJ terminating its negative interest rate policy (NIRP) without prior adjustments to forward guidance appears low.
• We anticipate that any revisions to forward guidance would likely coincide with the publication of an Outlook Report in January or April. Ultimately, a shift from the current strong easing bias to a tightening bias should be necessary before the BoJ considers rate hikes. See the MNI BoJ Preview here.
• Cash JGBs are dealing slightly mixed, with yield movements bounded by +2bps (1-year) and -1bp (20-year). The benchmark 10-year yield is 0.1bp lower at 0.679%.
• The swaps curve has bear-steepened, with rates 0.5bp to 3.2bps higher. Swap spreads are generally wider across maturities.