While the clock ticks down to BoJ’s July 31st Monetary Policy Statement, where officials could be expected to debate policy changes to sustain, not tighten, their stimulus program, 10-Yr JGB continue rising.

On Monday the 23rd of July and following the announcement for policy speculation, 10-Yr JGB improved by 4bps and were markedly boosted cumulatively higher hitting a daily top 6bps higher, at 0.09%, amid BoJ’s conclusion to offer unlimited amount of bonds purchasing at fixed 0.11% rate.

But note, BoJ has been forced to prop-up the yield cap before, although, followed through with purchasing bonds only once.

Although bank officials ought to remove speculation as a driving force of market direction, “maintaining stimulus” allows the major elements of inflation and negative interest rates come into discussion in the July meeting, which require JGB and ETF buying added on the agenda.

At this periodical stage though, any adjustments of the target JGB, or buying of ETFs, would have to remain limited to talks only, as any hasted adjustment could harm the yield control, rather than mitigate market distortions.

Despite the naysaying, note that BoJ’s unorthodox policies and practises since the initiation of QE in September 2016 have held back Japanese Yields from rising along with US and European yields and kept the 10-Yr JGB Yield target near zero.

This allowed Japan to gradually reduce its asset purchasing program without having investors think it is “tapering”.

Considering Japan’s slowing in Core Inflation from an anticipated 0.6% to 0.4% (0.7% YoY) at the July 24 report, the lowest since November 2016, it would most likely be unorthodox to even consider changes to Japanese interest rate targets before the Core index inches higher towards the 2% target.

An extreme option would be to lower the inflation target of course, as the aggressiveness in bond buying hasn’t really pushed the CPI higher like it did in Europe for example.

Another strong option would be to change the target for 10-Yr bonds in order to accommodate for a wider trading range.

Of course, this will most likely be determined in the July meeting but as a softer approach BoJ could examine guidelines to increasing the long-term yields and hence inflation more naturally.