2 reasons for a Bank of Japan 'tweak' to yield curve control (YCC) at its July meeting

<p>The inflation data from Japan for May indicated strong price growth still:</p><ul><li><a href="https://www.forexlive.com/news/japan-cpi-for-june-headline-32-yy-vs-35-prior-20230622/" target="_self" rel="follow">Japan CPI for May, headline 3.2% y/y vs. 3.5% prior</a></li><li>T<a href="https://www.forexlive.com/centralbank/the-inflation-data-from-japan-today-is-going-to-reignite-speculation-of-boj-policy-change-20230623/" target="_self" rel="follow">he inflation data from Japan today is going to reignite speculation of BOJ policy change</a></li></ul><p>ING warn of more to come:</p><ul><li>the current energy subsidy program will end in September and some power companies will begin to raise electricity fees again. Thus, we see headline inflation staying above 2% for a considerable time.</li></ul><p>And a July (meeting is 27 and 28 of the month) policy change:</p><ul><li>We think that the BoJ will upgrade its inflation outlook in July and a yield curve control (YCC) tweak is still possible despite the dovish comments from several board members. </li><li>They will probably justify their action by saying that a YCC tweak is not a tightening, but instead, that it is done to improve market functionality. </li><li>Another reason that we think a July tweak is possible is that a shift in YCC may need to come as a surprise to avoid a large bond selloff.</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.