Japan Economic & Financial Weekly

The 10-year JGB yield turns higher in January. Early in the new year there are speculative or leaked news reports claiming the BoJ will embark on a normalization of its ultra-easy monetary policy at the January 22-23 Outlook Report meeting. BoJ messaging around the January 11 branch managers’ meeting also seems intended to prepare the markets for such an outcome. The 10-year JGB yield resumes testing the upside as investors again price in an unwinding of NIRP and climbs above 1.0% on speculation of successive rate hikes if the Bank decides to end both NIRP and YCC at the January meeting. However, Governor Kazuo Ueda tries to keep the market from getting ahead of itself by emphasizing a cautious stance on successive rate hikes at his post-meeting press conference, and that creates upside resistance for the 10-year yield. The 20-year JGB yield trades at a level that raises the 10s20s JGB spread to around 75bp.