We now believe that the BoJ has started the process of removing YCC by first allowing greater flexibility for the 10-year JGB yield to move above 0.5%. 

A full removal of yield curve control could be phased in through the remainder of this year if the 10-year JGB yield begins to stabilize below the new hard cap at 1.0%. The next step would then be for the BoJ to begin raising interest rates out of negative territory. 

We are now forecasting the first rate hike from the BoJ in the 1H of next year. The shift toward tighter BoJ policy supports our outlook for the Yen to strengthen in the year ahead, although the recent YCC policy tweak has not been sufficient on its own to trigger a reversal of Yen weakness in the near-term.