Pressure on Japan’s Bonds Will Intensify If BOJ Relaxes Control
- Speculation on further changes to YCC will follow any changes
- BOJ has options to rein in sharp moves in bond yields
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The Bank of Japan faces a stiff challenge to prove that its yield-curve control policy remains in place should it allow 10-year yields to rise above the current cap of 0.5%.
By loosening the limits around the yield curve, the central bank will fuel a surge of speculation on the demise of the framework itself. Outgoing Reserve Bank of Australia Governor Philip Lowe knows all about the reputation damage of the collapse of his yield curve control policy.