Former BOJ economist Hideo Hayakawa speaks in an interview with Reuters
- BOJ may tolerate bond yield rises to around 0.4% under new July guidance
- With new guidance, BOJ can now conduct "stealth" rate hikes
In the interview, Hayakawa is basically saying that the BOJ is likely not seeing that 0.2% is the new ceiling for bond yields and that they may allow long-term rates to creep up to around 0.4% without explicitly hiking its yield target - i.e. "stealth" rate hikes.
On the possibility of the recession, you guessed it... it's because of the proposed sales tax hike that is to come next year.
Anyway, the thing about "stealth" rate hikes and letting yields run higher is that it is not going to go unnoticed by markets. And that is going to promote further strengthening in the yen - something that will continue to work against the BOJ as it continues to strive towards achieving its inflation target.
