YCC, rate expectations, and JGBs

We think there is a good chance the 10-year JGB yield would rise a lot further than it has already if the BoJ chose to abandon Yield Curve Control (YCC) tomorrow. Nonetheless, we doubt any big increase in the yield beyond what might reasonably be expected to result from the YCC-induced removal of the “kink” in the curve would last. A key reason is that we don’t think it would have implications for short-term interest rates in Japan.

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