- Inflation risks are becoming more pronounced
- If significant risks materialise, BOJ must be ready to withdraw stimulus more strongly - such as raising short-term rates
- Policy proposal calls for BOJ to allow bond yields to move more flexibly, following annual consultation with Japan
- Possible options include widening yield band, raising yield target, targeting shorter-term yields
The pressure is continuing to stay on the Japanese central bank here despite their policy decision last week. It seems like the chorus that is asking for change is getting louder and markets are also listening. 10-year JGB yields are back up to 0.49% today, just a whisker away from touching the BOJ ceiling of 0.50% again.