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Bank of Japan surprises the market with yield curve control tweak
Today we have seen two major surprises from Japan. First, the Bank of Japan has made a tweak to its yield curve control policy. Second, Tokyo inflation unexpectedly rose to 3.2% in July. The BoJ surprised the market with YCC adjustment Stronger-than-expected inflationary pressure has finally moved the BoJ to tweak its YCC policy, and financial markets seem busy digesting the news. We argued that the BoJ could shorten its target yield from the 10Y to 5Y tenor at this meeting, but the BoJ decided to keep the official cap of the 10Y JGB at 0.5%, while allowing more flexibility with the new, so-called strict cap, and ... (full story)