FLJP - What's The Next Step For The Bank of Japan?

2024-06-07 10:15:00 ET

Summary

• In March, the Bank of Japan abolished its 8-year-old negative interest rate policy, hiking rates for the first time in 17 years by raising its benchmark rate to 0-0.1%.
• To combat inflation while also avoiding an excessive surge in interest payments, the BOJ is considering passive quantitative tightening.
• If the BOJ does reduce buybacks for these maturities, the resulting reduced demand would likely steepen that part of the yield curve, as yields on these bonds would rise more than yields on other maturities.

By Yusuke Hashimoto

Passive quantitative tightening could be the Bank of Japan's next step toward normalization. Here's why.

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