**As seen in Risk In The Week report 06/09/24, subscribe at cablefxm.co.uk/reports
Back in April, the Bank of Japan left its policy rates unchanged at 0.0% and 0.1%, the target band was in line with economists' expectations. Heading into the meeting, sources had leaked a potential shift into reducing government bond purchases as part of the BoJ's thinking, the statement reflected this as the bank dropped the wording on buying the same amount of bonds as before. Also, the statement highlighted the risks of prices titled to the upside. Following the decision, we have had a record amount of yen intervention operations between April and May. Ueda has been vocal on concerns that the yen weakness could filter into higher domestic inflation. Economists expect the BoJ to announce a reduction of bond buying as early as this meeting as the bank balances higher yield risks for weaker yen. 10-year JGB yields are steady above 1.0%, yields had reached the highest level since 2011 back in late May. Strategists at TD Securities said they expect the BoJ to deliver three more rate hikes into the end of the year, they have called July, October, and December moves. TD has noted that the central bank now stands more sensitive to FX, therefore, a hawkish approach could discourage the short yen trade. The desk at Natixis flagged risks of a rate hike as soon as this week as the central bank could take advantage of recent positive news flow, they added that the BoJ could maintain the option to purchase JGBs at its discretion to cap yields from surging.
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