Following hawkish comments by BoJ Governor Ueda, we now expect the Bank to lift its policy rate for the first time in sixteen years in January. The Bank could call time on Yield Curve Control at the same time given that 10-year yields are now the highest in a decade and the Bank’s large stock of JGB holdings may keep depressing their yields. But given that bond yields were much higher still when the Bank last hiked its policy rate, we suspect the Bank will want to keep a lid on bond yields for now to prevent financial dislocation. Accordingly, we only expect the demise of Yield Curve Control by mid-2024.
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