Intriguing RV graphs: JGB yield curve (medium/long-term JGBs) failing to flatten
Key points
- JGB yield curve fails to flatten despite rate-hiking phase; contrary to conventional wisdom of "rate hike → flattening"
- BoJ's QT launch and fiscal expansion concerns alone cannot explain this phenomenon; rising long-term inflation expectations also hampers flattening
- Based on US/Europe experience, we see peaking of long-term inflation expectations as trend reversal sign; viewing 2% as guideline
