The Bank of Japan’s Kazuo Ueda is in a tight spot. If he stands pat on policy this week he risks sending the yen to a multidecade low and opening up his yield control program to speculative attack in the market.
At the same time, if he raises the ceiling on 10-year yields under yield curve control — explicitly or implicitly — the governor may invite long-term rates to rise to levels inconsistent with economic fundamentals, jeopardizing his goal of achieving stable inflation.
In a sign of just how fraught the discussions on policy may be, BOJ officials are likely to monitor yield movements until the very last minute before deciding on whether to adjust YCC, according to people familiar with the matter.