The Bank of Japan is likely to end its yield-curve control (YCC) policy between April and June, according to Mitsubishi UFJ Morgan Stanley Securities.
"The inconsistent policy of trying to improve on market functioning while keeping yield-curve control in place is approaching its limit,” Naomi Muguruma, chief fixed-income strategist at the brokerage, wrote in a note on Friday. "The best solution is to let the market decide yields.”
Muguruma’s forecast for YCC to end mirrors growing expectations among investors that the BOJ’s decision last month to double the 10-year yield ceiling to 0.5% was just the first step of more policy changes. An unwinding of the world’s last negative-rate settings may unleash renewed strength in the yen and spur a reallocation of funds across global financial markets.