{quote} Hey mate, speaking of Ueda, Do you think he will keep the ultra loose monetary policy and the YCC the same? Or New governor, new policies- given Japan CPI is constantly rising
Yes, they may look to alter their policies to cope with domestic inflation. My view is that, BOJ may want keep bank rates low, while allowing yield cap to widen a bit more, but not too much. Needless to say, any rising rates or yield would undoubtedly cast a rise in govt borrowing cost, which is why they (MOF) want them low. My take is, we could see 0% bank rate, and +/-75 bps YCC. That's probably the most they could (want to) do.
Alternatively, they could always alter their inflation target, something I don't see as a strong compromise, given 2% is rather standard globally. The only way out for yen to rise, is to see US yield dropping, thus a narrower spread between US10Y and JP10Y. Currently, as I'm watching the 3-mo and 6-mo treasury auctions, they now at 4.72% and 4.91%, respectively. Very close to 5%. The US2Y just concluded, and it rose by even more, by +52 bps, now at 4.67% vs 4.14% three weeks ago. The 10Y still at 3.6%. I'll watch this space closely, into May '23 FOMC.
