Long-term bond yields have dropped back in recent weeks which meant that the Bank of Japan had to work less hard to defend its 10-year yield target. Given that we no longer expect US 10-year Treasury yields to surge, our previous forecast that the Bank will widen the tolerance band around its yield target is no longer fit for purpose. And with yield differentials no longer moving sharply against the yen, the renewed strengthening of the exchange rate over the last couple of weeks has further to run.
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