The Bank of Japan (BOJ) will likely raise its inflation forecasts next week and debate whether further steps are needed to address market distortions it sought to fix with December's surprise tweak to its yield control policy, sources say.
to widen the band around its 10-year yield target has failed to remove market distortions caused by its huge bond buying, leaving traders guessing whether more steps could come as early as its Jan. 17-18 rate review.
"Japan has yet to see inflation stably and sustainably achieve the bank's 2% target," one of the sources said. The BOJ last month stunned markets by widening the band it sets around the 10-year yield target, a move it described as aimed at mitigating the rising cost of prolonged easing. The yen jumped and the 20-year Japanese government bond yield rose to an eight-year high of 1.400% on Thursday after Japan'snewspaper reported the BOJ may take additional steps next week to address the side-effects of monetary easing.
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