Skip to main content

Increasing doubt over Yield Curve Control’s longevity

In less than two months, we should know who will replace Bank of Japan Governor Kuroda Haruhiko, whose term ends on 8th April. Whoever replaces him will be under increasing pressure from the government to abandon Yield Curve Control (YCC), which has an interest in bringing down inflation to shore up its approval rating. What’s more, bond market function according to bond dealers is at its worst ever, and the Bank’s decision to manage yields of maturity ranges other than 10 years as part of YCC threatens to stifle the bond market further.

Finally, there’s also been a shift in tone among the Board, with several members now seeing “strong momentum” behind the recent rise in consumer prices. That’s probably not enough to convince them to raise the policy rate, especially when the economy is likely to be in recession when the new governor assumes office. But the bar to abandoning YCC is much lower. If the Bank does jettison YCC, we expect to see a faster fall in inflation than we currently expect, as the yen is likely to appreciate more sharply in response.

Drop-Ins – The World In 2023 (10-11 January): Will 2023 be another rollercoaster year for economies and markets? Join our senior economists for these special briefings on 10th and 11th January to find out what to expect in the coming 12 months. Register now

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services


Get access