Takatoshi Ito, a contender to succeed Bank of Japan (BoJ) Governor Haruhiko Kuroda, said that the central bank’s policy tweak to the yield curve control (YCC) could be the first step toward an exit from its ultra-loose monetary easing.

Key quotes

“The shock move on Tuesday to widen the bond yield band is a “positive development” that would improve the functionality of the Japanese government bond market.”

“See increasing signs that inflation could stick around above the BOJ’s 2% target, as cost-push factors fuel a positive price mechanism based on higher wages and stronger consumption.”

“There’s hope that the demand side will be stimulated by a large wage hike, which is a response partly to a high inflation rate this year.”

“Maybe next year we will see demand-pull inflation and stabilize it at 2% and that will be the foundation for the step toward exit.”

Market reaction

At the time of writing, USD/JPY is sustaining its rebound above 132.00, adding 0.40% om the day.