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Revision of long-term rate target, ‘July’ expected most, QUICK survey

THE NIKKEI via scoutAsia

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May 30, 2023 2 min read
Revision of long-term rate target, ‘July’ expected most, QUICK survey

According to the monthly bond survey for May released by QUICK on 29th, the largest share of 31% of all respondents answered that the Bank of Japan will revise its longterm rate guidance target “July.” Voices anticipating a policy revision by the end of the year are persistent, and caution about rising interest rates continues to prevail.

“October” (15%) and “December” (13%) followed, with about 80% of respondents expecting a revision through December 2023. The BOJ decided to maintain its large-scale monetary easing measures at its Monetary Policy Meeting in April. Compared to the time of the March survey, when 60% of respondents expected the policy revision to take place between April and June, the market’s expectation has shifted to July or later, albeit later, there is a persistent view that the BOJ will revise its longterm rate guidance target by the end of the year.

A market participant called it “We’re seeing a trend of inflation spilling over into higher wages” or “As the strength of domestic inflation pressure is confirmed, upward pressure will be applied to the longterm rate, forcing the BOJ to drastically review its YCC (yield curve control, short- and long-term interest rate manipulation).”

There is a minority view that expects the Negative interest rate to be lifted. The most common expectation for when the Negative interest rate would be lifted was “April 2024” (16%), while 9% of all respondents expected the Negative interest rate to be lifted within 2023.

The survey was conducted from 23rd to 25th among 181 fixed income market sources, including securities firms and life insurance companies, and 121 responded.