Barclays on the BoJ

We retain our forecast for the BoJ to raise its target for long-term yields by a marginal 10bp in Q3 18, assuming CPI inflation is reaccelerating at that time, thereby taking its first step in the direction of monetary policy normalization.

The process of normalization from QQE to YCC and from long-term to short-term sectors as the target of YCC could depend heavily on changes in the “distribution” of Policy Board members, including the appointments of the next BoJ governor and two deputies.

 We believe the BoJ is likely to lower its CPI forecasts when it publishes its next quarterly Outlook Report at the end of the 30-31 October MPM. In today’s statement, the BoJ highlighted the sluggish trend not only in realized CPI inflation but also in inflation expectations (“inflation expectations have remained in a weakening phase”).

21 Sep 2017 - 12:38- Fixed IncomeData- Source: Barclays

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