Japan Economic & Financial Weekly

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Modified monetary policy outlook prompts revisions to 10-year JGB yield scenario

The 10-year JGB yield first dips and recovers in April before moving higher. In the first half of the month, it trades with a downward bias on buying at the start of the new fiscal year by investors seeking to maximize carry. A key contributor is the sense of reassurance created by the BoJ’s plan to keep financial conditions accommodative and maintain its current level of JGB purchases. However, the 10-year yield takes on an upward bias in the second half of the month and begins totest the upside with an eye on the recent high of 0.970% posted on November 1,2023. The trigger for this move is the April 26 Outlook Report, as speculation emerges that the Bank will raise its inflation projections in that report or note the possibility of an upturn in prices based on the large increases in base pay resulting from the spring wage negotiations. These factors help to fuel market concerns about additional rate hikes and boost expectations of an increase in the 10-yearyield. The 30-year JGB yield trades at a level that keeps the 10s30s JGB spread at around 106bp