The Bank of Japan (BoJ) is facing a situation where an abrupt end to its yield curve control (YCC) policy 'can't happen' due to the country's significant debt load, which would lead to a sharp increase in yields. BoJ Governor Kazuo Ueda has highlighted the 'HIGH UNCERTAINTY' regarding both domestic and overseas economies, and price developments. He stated that effective monetary policy 'REDUCES RISK' of economic deterioration or deflation. Ueda also pointed out that an increase in corporate profits 'MUST TRANSLATE' to higher household income, and while service prices are 'INCREASING GRADUALLY', some firms struggle with passing on higher labor costs. Demand is 'SUPPORTED BY GOVERNMENT STIMULUS' measures and the BoJ's easy policy. Moreover, Ueda indicated that there is a 'positive potential aspect' to having higher interest rates under normal economic conditions.
Bank of Japan Governor Kazuo Ueda pointed out some positive potential aspect of having higher interest rates under normal economic conditions https://t.co/MsuNdWERpe
Bank of Japan Governor Kazuo Ueda pointed out some positive potential aspect of having higher interest rates under normal economic conditions https://t.co/gVry7yAnsI
🔴 BOJ GOVERNOR UEDA: EFFECTIVE MONETARY POLICY REDUCES RISK OF ECONOMIC DETERIORATION OR DEFLATION
🔴 BOJ GOVERNOR UEDA: SERVICE PRICES INCREASING GRADUALLY, BUT SOME FIRMS STRUGGLE TO PASS ON HIGHER LABOR COSTS
🔴 BOJ GOVERNOR UEDA: INCREASE IN CORPORATE PROFITS MUST TRANSLATE TO HIGHER HOUSEHOLD INCOME
🔴 BOJ GOVERNOR UEDA: HIGH UNCERTAINTY REGARDING DOMESTIC AND OVERSEAS ECONOMIES AND PRICE DEVELOPMENTS
🔴 BOJ GOVERNOR UEDA SAYS DEMAND SUPPORTED BY GOVERNMENT STIMULUS MEASURES AND BOJ'S EASY POLICY
Markets fixate on anything that's exciting. An abrupt end to BoJ yield curve control (YCC) would be exciting, since Japan's debt load (horizontal) would send yields sharply higher (vertical). This is why an abrupt end to YCC can't happen. Japan has no choice but to cap yields... https://t.co/AX9TVKGFog