Effective end of YCC adds to the case for a stronger yen

The BoJ’s decision earlier today to, in effect, end its long-standing Yield Curve Control (YCC) policy means that long-term government bond yields in Japan will become more responsive to economic conditions and developments in global markets. While that may only lead to a limited rise in the 10-year JGB yield, it strengthens our conviction that the gap between yields in Japan and those in other major economies will narrow and that the yen will appreciate over the second half of the year.

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