Key Takeaways

  • The impending exit from yield curve control (YCC) and

    negative interest rate policy (NIRP) in Japan is now a

    consensus view. But there is a lively debate over the

    timing and extent of the adjustments.

  • Minutes from the January BoJ meeting revealed a

    distinct hawkish shift among members, showing

    greater confidence around achieving the inflation


  • The BoJ thinks it has a “golden opportunity” to adjust

    policy before other central banks get into rate cutting

    mode, pinning its hopes on a “virtuous cycle between

    wages and prices”.

  • Policymakers have stated that a wide range of signals,

    both quantitative and qualitative, must be monitored to

    assess developments in wage growth.

  • We think inflation, wage growth and expenditure data

    provide a mixed picture and have yet to fully confirm

    that price pressures are sustainable. While the Shunto

    wage round should be strong, headline inflation is

    falling back and the economy is in recession.

  • While there are risks around the timing of a policy shift,

    the BoJ is focusing on spring wage negotiations, the

    April regional bank report, and its own monetary policy

    review. We expect a shift by July, although the extent

    of subsequent policy tightening may be limited.


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