Headlines via Reuters from the IMF's Global Financial Stability Report:
- Changes to the BOJ's yield curve control may affect international financial market through the three channels of exchange rates, term premiums on sovereign bonds and global risk premiums
- Allowing more flexibility in YCC could have some repercussions in global markets
- Allowing more flexibility in YCC could help prevent abrupt policy changes later that could trigger large spillovers
- Should Japanese long-term rates rise further, Japanese investors' repatriation of funds could affect sovereign bond yields in Australia, several euro area countries and US
- Some emerging markets like Indonesia, Malaysia could also face material capital outflows if Japan long-term rates rise further
- Pace and possible effects of repatriation could be larger should markets be surprised by BOJ’s announcements and actions
- Central banks must offer clear communication when announcing, implementing any changes in instruments, framework or stance of monetary policy
On that last point BOJ dep gov Uchida made it quite clear at his recent testimony that the Bank of Japan will not be communicating on monetary policy ahead of meetings. The IMF won't be getting a sneak preview heads up.
Bank of Japan (BOJ) Deputy Governor Shinichi Uchida
