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Outlook for BoJ monetary policy and 10-year JGB yield following surprise rate hike
The yield on the newly issued 10-year JGB is reluctant to decline this week. Buyers feel reassured now that the July BoJ and Fed meetings are over, and if the July US payrolls report (Aug 2) indicates a further cooling of inflationary pressures or a slowdown in hiring, thereby weighing on the 10-year UST yield, the 10-year JGB yield moves lower in sympathy. However, it finds support near the key psychological threshold of 0.90% due to lingering concerns about additional BoJ rate hikes. The JGB market sees some selling again if the June Monthly Labour Survey (Aug 6) points to a further acceleration of wages (total cash earnings) or if the Summary of Opinions for the July 30-31 Monetary Policy Meeting (Aug 8) confirms more hawkish views among Policy Board members.
