Assessing the fall-out from the change to the BoJ’s YCC

The surge in government bond yields around the world in response to today’s decision by the Bank of Japan to tweak its policy of Yield Curve Control highlights the risks to international markets posed by the country’s huge investment overseas. Nonetheless, we don’t envisage a meltdown in the JGB market, which we think will even get some support from foreign bond markets next year.

In view of the wider interest we are also sending this Asset Allocation Update to clients of our Global Markets, FX Markets and Japan Economics Services.