VIEW: Societe Generale: BoJ Likely To Leave YCC Unchanged Next Year

Societe Generale note expect “the 10-year JGB yield to fluctuate around 0.4% for the time being. At the same time, given that the BoJ also announced a nimble response for each maturity by increasing the amount of JGB purchases further and conducting fixed-rate purchase operations, 20- and 30-year JGBs should move around 1.2% and 1.6%, respectively, for the time being.”

• “Going forward, a further slowdown in overseas economies and given our views on the spring wage negotiations and public debt management, we would expect the new governor to leave the current YCC framework unchanged next year. However, considering that the government may want to announce a revision to the accord relatively early after the appointment of the next BoJ Governor, we think the accord will be revised and that the “inflation-overshooting commitment” will also be deleted at the April monetary policy meeting. If the BoJ deletes this commitment, the BoJ’s balance sheet may gradually decrease in the future because the BoJ does not reinvest unlike the Fed and ECB.”