TSLombard this time. I personally think that the Fed will pivot before the BOJ breaks.
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BoJ says no. Pressure has been rising on the Bank of Japan to tweak its yield curve control (YCC) policy and abandon the “weak yen is good” rhetoric against a backdrop of soaring DM interest rates and intensifying pressure on the currency. Traders ramped up short-selling in the bond futures and interest rate swap markets ahead of last week’s Monetary Policy meeting, effectively betting that the BoJ will “break”– i.e., alter a rates policy that is increasingly out of sync with that of the Fed and other major DM central banks. The BoJ’s response was instead to double down on its bond purchases and reiterate its resolve to keep borrowing costs at “present or lower” levels with a view to supporting what has so far been a weak post-Covid economic rebound.
