Next BoJ policy move could be elimination of negative interest rates – Goldman Sachs

Goldman Sachs Japan Economist Naohiko Baba expressed her take on the Bank of Japan’s (BoJ) next policy move after the surprise revision to its yield curve framework on Tuesday.

Key quotes (via Bloomberg)

“The BOJ’s greater emphasis on the need to enhance the JGB market functioning suggests to us an increased likelihood that it will abandon the negative interest rate policy.”

“Such a move would be made to strengthen the sustainability of the BoJ’s yield curve control.”

“BoJ is unlikely to widen the target band any further.”

“Next step will likely be major, such as changing the policy interest rate targets or terminating YCC altogether.”

“The negative interest rate is “at the heart of monetary policy” and it’s hard to withdraw it without achieving the BOJ’s inflation target … but terminating it may be seen as the desirable next step, given the burden it has placed on financial institutions and how it’s insulated by global long-term yield trends.”