Japan Economic & Financial Weekly

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Continued uncertainty surrounds BoJ's "detailed plan" to reduce bond purchases

The yield on the currently issued 10-year JGB treads water this week. The official US payrolls report for June (Jul 5) is expected to show easing labor market conditions and less upward pressure on wages, which adds to speculation of a September start to Fed rate cuts. That pushes the 10-year UST yield lower and also weighs on the 10-year Japanese bond yield. However, the BoJ’s Bond Market Group meetings on July 9-10 underscore concerns about its detailed plan to reduce its JGB purchases over the next year or two, which will be released at the July 30-31 Policy Board meeting. If the reports presented at the July 8 meeting of BoJ branch managers offer further evidence of a virtuous cycle of wages and prices, they may fuel worries about the hawkish scenario of a reduction in BoJ bond purchases and a simultaneous July rate hike.