The Bank of Japan’s use of the term “flexible” to describe bond purchases suggests the central bank may allow government bonds targeted in its yield curve control program to trade beyond the 50 basis point band set last month, according to John Vail, chief global market strategist for Nikko Asset Management.
(Bloomberg) — The Bank of Japan’s use of the term “flexible” to describe bond purchases suggests the central bank may allow government bonds targeted in its yield curve control program to trade beyond the 50 basis point band set last month, according to John Vail, chief global market strategist for Nikko Asset Management.
“It opens the door to yield-curve control change in the future. It could imply slack around the 50 basis point band,” said Vail. “It could be that it’s a phrase that will help calm some of the people who in the administration would like the policy to be more flexible.”
Trading in the yield was volatile Wednesday, with the rate piercing the ceiling for a fourth day, before plummeting more than 10 basis points.
The BOJ left its policy unchanged Wednesday. It targets a yield of zero on the 10-year government bond and allows it to trade within 50 basis points of the target. Last month, the central bank abruptly widened the band to 50 basis points from 25 basis points in a sign markets interpreted of policy tightening.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.