According to media reports on Tuesday (October 24th), insiders revealed that Bank of Japan officials are continuously monitoring the trend of bond yields and may adjust the "Yield Curve Control" (YCC) plan again at next week's monetary policy meeting.
In 2016, the Bank of Japan launched YCC - to resolutely lower the yield of Japan's 10-year treasury bond bonds through unlimited bond purchases. Earlier this year, the bank changed the upper and lower limits of the yield range of plus or minus 0.5 percentage points from "strictly restricted" to "reference", allowing long-term interest rate fluctuations to exceed plus or minus 0.5% to some extent.
The insider added that the recent sell-off of US treasury bond bonds has brought increasing pressure to the Japanese bond market, and officials will observe the "last moment" before making a decision on whether to adjust YCC. They pointed out that any decision at that time must be very cautious.
In terms of specific operations, insiders say that the Bank of Japan has multiple options, including simply raising the daily interest rate level for bond purchases from 1%, canceling the reference level of 0.5%, or adjusting the bank's daily policy implementation methods.
Insiders explained that some officials believe that instead of waiting for YCC to be attacked and forcing the central bank to make large-scale bond purchases, it would be better to adjust this plan "preemptively". However, if the upward momentum of the US treasury bond bond yield is weakened, and the Japanese bond yield will also decline, then the need for adjustment is not very great.
On Monday, the yield of the 10-year US treasury bond bond, the "anchor of global asset pricing", rose above 5%, returning to the high level since July 2007, which once pushed the yield of treasury bond bonds of many countries to rise collectively.
Within the day, as the US bond yield fell to around 4.85%, the Japanese bond yield also fell from a 10-year high.
Insiders also mentioned that although some progress has been made in terms of prices, officials generally believe that the central bank's target of stabilizing inflation at 2% has not been achieved. Given this, there should be no grand measures towards policy normalization at next week's meeting, such as raising interest rates to end negative interest rates.
According to the schedule, the Bank of Japan is scheduled to announce its latest interest rate resolution on October 31st, and there will be another time this year on December 19th. Looking ahead to next year, the Bank of Japan will hold interest rate meetings in January, March, and April.
As previously mentioned by CaiAssociated Press, the overnight index swap curve in Japan shows that the probability of the Bank of Japan ending its negative interest rate policy within the year is currently 20% in market pricing. This probability increases over time and will rise to 100% by the end of April next year.