SCJ - Flash Insights: Bank of Japan - A 'Watchful' Adjustment

2024-03-20 06:01:00 ET

Summary

• The Bank of Japan raised interest rates for the first time since 2007 and has eliminated the yield curve control framework.
• According to the central bank, the virtuous cycle between wages and prices was assessed to have come into sight, bringing the 2% inflation target within a sustainable and stable possibility by the end of fiscal year 2025.
• The markets have seemingly taken the huge buildup of the end to negative Japanese rates in their stride.

By Rini Sen, Economist, Franklin Templeton Fixed Income

The Bank of Japan (BoJ) tightened monetary policy at its March 19 meeting, abolishing the yield curve control framework and raising rates to 0.0%-0.1%, for the first time since 2007 (in a 7-2 majority vote). According to the central bank, the virtuous cycle between wages and prices was assessed to have come into sight, bringing the 2% inflation target within a sustainable and stable possibility by the end of fiscal year 2025 (March 2025). With this, the 1.00% soft cap on the 10-year Japanese government bond (JGB) yield was also removed....

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