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10-year yield ceiling will be tested again soon

10-year JGB yields have traded well within the 50bp tolerance band since the BoJ maintained its policy settings on Wednesday. Even so, we still expect the Bank to jettison Yield Curve Control in April. As has been the case over the past year, market speculation about a policy shift should build in the run-up to subsequent policy meetings, pushing yields against the ceiling and forcing the Bank to make renewed large bond purchases. The government’s nomination of the next BoJ Governor in February could also become another flashpoint.

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