Iain Stealey, International CIO for Fixed Income at J.P. Morgan Asset Management, comments on the Bank of Japan:
‘Under Governor Ueda’s leadership, the Bank of Japan (BoJ) is moving to a more pragmatic approach – today’s adjustment in Yield Curve Control policy suggests it is keen to take a more flexible approach and avoid unlimited intervention in the JGB market.
‘The central bank has seen clear evidence that inflation is stickier than expected, reflected in the upward revision in inflation forecasts, and acknowledged that the inflation target is likely to be achieved by end of FY25. The current monetary setting, which still incorporates negative interest rates, quantitative easing and control over longer end yields, is clearly inconsistent with economic fundamentals.
‘After being a laggard in this tightening cycle, we expect the BoJ to take a more active approach from here, potentially ending negative interest rates and “fully” abandoning Yield Curve Control as early as spring next year when the next forecast update is available.
‘In portfolios, we continue to underweight Japan, reflecting expectations for a BoJ which is on the front foot.’
