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MNI BoJ Preview - January 2023: Stick Or Twist

Markets have backed the BoJ into corner, we look for no change in policy settings, but have no strong conviction.

Central Bank PreviewHomepageBond Market NewsBank of Japan (BOJ) Market NewsBoJ - PreviewCentral Bank ReportsMarkets

EXECUTIVE SUMMARY

  • The recent round of well-documented press speculation, indicating that the BoJ will conduct a review of the side effects of its ultra-loose policy settings at the upcoming monetary policy meeting, coupled with the shrouding of trust in the Bank’s communication channels after last month’s surprise YCC tweak, has led to a meaningful market test of the BoJ’s will ahead of the meeting.
  • We would suggest that the Bank will have a preference towards holding policy settings steady and lean into this as our baseline pre-meeting assumption.
  • Expect a mark-up in underlying inflation forecasts, although the Bank will not suggest that its inflation goal has been met, given the cost-push nature of the move in inflation and the want to foster a meaningful wage growth.
  • Click to view full preview: BOJ Preview - January 2023.pdf

Fig. 1: 10-Year JGB Yield Vs. Japan 10-Year Swap Rate

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EXECUTIVE SUMMARY

  • The recent round of well-documented press speculation, indicating that the BoJ will conduct a review of the side effects of its ultra-loose policy settings at the upcoming monetary policy meeting, coupled with the shrouding of trust in the Bank’s communication channels after last month’s surprise YCC tweak, has led to a meaningful market test of the BoJ’s will ahead of the meeting.
  • We would suggest that the Bank will have a preference towards holding policy settings steady and lean into this as our baseline pre-meeting assumption.
  • Expect a mark-up in underlying inflation forecasts, although the Bank will not suggest that its inflation goal has been met, given the cost-push nature of the move in inflation and the want to foster a meaningful wage growth.
  • Click to view full preview: BOJ Preview - January 2023.pdf

Fig. 1: 10-Year JGB Yield Vs. Japan 10-Year Swap Rate

Keep reading...Show less