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Counting down the clock on Yield Curve Control

The widening of the Bank’s tolerance band around 10-year yields has done little to improve market functioning while the government seems to be pressing for a policy shift in response to higher inflation. In these circumstances, Yield Curve Control looks unsustainable. It may not be abandoned this month but the nomination of a less dovish successor for PM Kuroda in coming weeks would probably seal its fate. However, a renewed decline in inflation will prevent policy rate hikes.

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