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MNI BOJ Review- October 2023: An Increase In YCC Flexibility

The BOJ introduced a new level of flexibility to its yield curve control (YCC) by suspending the daily fixed rate operation on 10-year JGBs.

Central Bank ReviewHomepageBoJ - ReviewCentral Bank ReportsMarkets

EXECUTIVE SUMMARY

  • During the Bank of Japan's (BOJ) Monetary Policy Meeting (MPM) held on October 30-31, the widely expected decision to keep the policy rate at -0.1% was unanimously endorsed. However, the BOJ introduced a new level of flexibility to its yield curve control (YCC) by suspending the daily fixed rate operation on 10-year JGBs.
  • The BOJ's decision to define the 1% upper YCC limit as a "reference" suggests the potential for it to slightly exceed this threshold.
  • The exact extent of this newfound flexibility remains a topic of discussion, although Governor Ueda asserted that a significant increase above 1% is improbable.
  • In its quarterly Outlook Report, the BOJ made some upward adjustments to its inflation projections. FY2023 and FY2024 core CPI forecasts were raised to +2.8%, while FY2025 was slightly increased from +1.6% to +1.7%.
  • A noteworthy addition to the report was a new sentence on the front page: "toward the end of the projection period, underlying CPI inflation is likely to increase gradually toward achieving the price stability target." This statement hints at a possible upgrade in the BOJ's view on the long-term inflation trend.
  • Full review here:

    • BOJ Review - Oct 2023.pdf



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EXECUTIVE SUMMARY

  • During the Bank of Japan's (BOJ) Monetary Policy Meeting (MPM) held on October 30-31, the widely expected decision to keep the policy rate at -0.1% was unanimously endorsed. However, the BOJ introduced a new level of flexibility to its yield curve control (YCC) by suspending the daily fixed rate operation on 10-year JGBs.
  • The BOJ's decision to define the 1% upper YCC limit as a "reference" suggests the potential for it to slightly exceed this threshold.
  • The exact extent of this newfound flexibility remains a topic of discussion, although Governor Ueda asserted that a significant increase above 1% is improbable.
  • In its quarterly Outlook Report, the BOJ made some upward adjustments to its inflation projections. FY2023 and FY2024 core CPI forecasts were raised to +2.8%, while FY2025 was slightly increased from +1.6% to +1.7%.
  • A noteworthy addition to the report was a new sentence on the front page: "toward the end of the projection period, underlying CPI inflation is likely to increase gradually toward achieving the price stability target." This statement hints at a possible upgrade in the BOJ's view on the long-term inflation trend.
  • Full review here:

    • BOJ Review - Oct 2023.pdf