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JGB yield and yield curve scenarios for March and FY26-FY28
Long-term and super-long-term JGB yield scenario for March
Long-term and super-long-term JGB yield scenario for March
We project the 10-year JGB yield will continue to fluctuate within its 2026 trading range in March. There is likely to be mixed speculation regarding the timing of the Bank of Japan’s next rate hike and the Takaichi cabinet’s efforts to discourage further tightening. With FY-end position adjustments also coming into play, the market is likely to trade without direction this month.
As detailed in the “Key events” section below, March brings a number of BoJ-related events, including a speech by Deputy Governor Ryozo Himino on March 2,the release of results from the spring wage negotiations (results of union demands on March 5, the first round of responses on March 23, and the second round of responses on March 27), and a Monetary Policy Meeting on March 18-19. The JGB yield curve will tend to bear flatten or bear/bull flatten on rising expectations of an early rate hike and bull/bear steepen in the event of speculation that a hike will be delayed due to the government’s attempts to discourage further tightening.
We will be closely watching Deputy Governor Himino’s speech and press conference. In a speech made on January 14, 2025, Mr. Himino expressed the view that downside risks to the US economy had faded and effectively telegraphed a rate hike by saying that “at the monetary policy meeting to be held next week, the Board will have discussion to decide whether to raise the policy rate or not.” We anticipate three possible patterns for his upcoming speech. First, if he reiterates that the Board “will have discussion to decide whether to raise the policy rate or not” (1), market expectations of a March rate hike would surge higher. Second, ifhe reaffirms the view conveyed by Governor Kazuo Ueda in his recent Yomiuri interview (“There are Monetary Policy Meetings in both March and April, and we intend to make a decision after carefully reviewing the information available at those meetings”) (2) -- the chance of a rate hike by the April meeting would probably rise somewhat from the current level of around 70%. Finally, if he emphasizes the need for “caution” in future rate hike decisions and is deliberately vague about the timing (3), expectations of a postponement of tightening would strengthen. The third case, however, would tend to foster the perception that his stance reflects government opposition to rate hikes, potentially intensifying concerns that the BoJ could fall behind the curve.
We forecast the BoJ will leave the policy rate on hold at 0.75% at the March MPM,1with an 8-1 or 7-2 majority vote in favor of standing pat. Policy Board member Hajime Takata, who proposed a rate hike at the January meeting, is likely to continue advocating for an increase in the policy rate. On February 13, Policy Board member Naoki Tamura suggested he would support a rate hike for sometime this spring, when the weather warms up and three consecutive years of wage increases can be confirmed as consistent with the 2% price stability target. Although publication of the first round of results from the spring wage negotiations is scheduled for March 23, after the MPM, a tally of unions’ demands will be published on March 5, and we cannot rule out the possibility that the Bank will deem this information sufficient for “confirmation.” In any event, the key focus at Governor Ueda’s post-meeting press conference will be the extent to which headdresses the possibility of considering a rate hike at the April meeting.