Surprise tweak to Japan’s yield control curve

Chief cabinet secretary Hirokazu Matsuno denied the Kyodo News Agency report, telling reporters on Monday (Dec. 19), that the government would not be revising the 2013 statement, as Reuters reported. Yet there’s already been one indication that the dovish central bank is open to some change.


The BOJ decided today (Dec. 20) to allow the 10-year bond yield to move 0.5% on either side of its zero percent target, widening the range from the previous 0.25%. Following the decision, the yen surged and Asian markets sank.

Kuroda said the change aims to enhance the sustainability of Japan’s monetary policy framework and does not signal the end of YCC or an exit strategy—but analysts have interpreted it as a sign of willingness to change.


“It could have been the last chance for the BOJ to move, amid incoming US recession and the end of the Fed’s rate hikes,” said Hiroshi Namioka, chief strategist and fund manager at Tokyo’s T&D Asset Management. “If later, it would have caused a much bigger risk of sharp yen strengthening and other market fluctuations.”

Person of interest: The next BOJ governor

A successor for Kuroda, who does not wish to be reappointed, has not yet been named. For the BOJ’s first change of guard in 10 years, prime minister Kishida will make the nomination and seek approval from both houses of parliament.


The two frontrunners to replace the governor are former deputy central bank governors Masayoshi Amamiya and Hiroshi Nakaso. Nicknamed “MR.BOJ,” Amamiya has consistently called for keeping ultra-low interest rates. Nakaso has been nudging the bank to move away from monetary easing—he’s even written a book about how to do it.

“They are both talented, they both have knowledge of the history of monetary policy, but I don’t think they are the only candidates,” deputy chief cabinet secretary Seiji Kihara said in an interview with Bloomberg News.


Former top financial diplomat Masatsugu Asakawa, Columbia university professor Takatoshi Ito, and former top currency diplomat Takehiko Nakao, have also been floated as possible choices. Like Kuroda, Asakawa and Nakao have both served as the president of the Asian Development Bank.

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