While the Bank of Japan was clearly in no mood today to give any ground to the bond traders testing the ceiling of Yield Curve Control, it would be even less keen to effectively shut down the JGB market by hoovering up the outstanding bonds it doesn’t already own. As such, we think it will try to relieve pressure by raising the ceiling before long. However, that wouldn’t be enough to put a lasting floor under the yen, which we still expect to end the year weaker than it is today. Elsewhere, the jumps in machinery orders in April and in import volumes in May are encouraging signs that domestic demand is rebounding strongly.
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