BOJ Can Speed up Tightening, but Unlikely to Step up JGB Purchases
Dow Jones
Sep 01
0827 GMT - Faster tightening is the BOJ's most immediate response to the increase in JGB yields, Capital Economics says. That can reduce lingering concerns about inflation, but it would probably take a further surge in yields to convince the BOJ to step up bond purchases again. The 10-year JGB yield reached 3% for the first time since 1996, but the move has been less abrupt than at the start of the year. Accordingly, the odds of major financial dislocations are small, says CE's Marcel Thieliant. Soaring yields could stress insurers and pension funds, but higher long-term borrowing costs have limited impact on economic activity as most private-sector debt in Japan consists of loans. And since JGB moves are part of a global selloff, authorities may see attempts to tame yields as futile.
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