Notwithstanding the new (and less conventional) policy language around YCC, effectively, the BoJ has raised the cap for 10-year JGBs from 50 bps to 100 bps. In fact, one can argue that compared to simply widening the range to +/-100 bps, the range now is actually -50 bps to +100 bps – reflecting an asymmetry that is slightly JPY-supportive.

We doubt if this will be the end of high USD/JPY volatility over the near term. The disappointing lack of revision to its inflation forecasts for FY2024 and FY2025 suggests that the BoJ is still not convinced that inflation can stay above 2%. In other words, this does not provide any new information on BoJ’s thinking. Verbal communication from the BoJ could continue to lean dovish.