Mixed, Light Calendar Ahead Of BoJ Policy Decision Tomorrow

JGB futures are richer in afternoon dealings, +24 compared to settlement levels, ahead of the BoJ Policy Decision tomorrow.

• There hasn’t been much in the way of domestic drivers to flag today.
• After Friday’s pushback by Fed officials against market expectations for easing in 2024, local participants were watchful of early weakness in US tsys during today’s Asia-Pac session. However, with no follow-through seen, local market selling abated. Currently, US tsys are dealings flat to 2bps richer.
• Cash JGBs are dealing mixed, with 0.6bps lower (10-year) to 2.7bps higher (2-year).
• Swaps are also mixed, with swap spreads tighter.
• Tomorrow, the local calendar sees the 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: