The Bank of Japan gave no ground at all to bond traders today as it left all its major policy settings unchanged. Governor Kuroda was resolute in claiming that Yield Curve Control has no limits in his press conference. But the likelihood is that defending the current ceiling on 10-year yields will require bursts of heavy JGB purchases. To prevent its bond holdings swelling to unsustainable levels, we think that the BoJ will choose to widen the tolerance band from ±0.25% to ±50% before long.
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