The nominal GDP level target that time forgot

Better late than never for Abe’s 2015 JPY 600 trillion nominal GDP target

The recent run-up in global bond yields coincided with the BoJ’s decision in late July to adjust its yield targeting framework, although the continued strength in the US economy would seem to be the larger factor at work in explaining higher yields. For all the catastrophising around the BoJ’s yield target, it has adjusted the target very much on its own terms and Japanese 10-year bond yields, while higher, remain consistent with the target range.

The BoJ has continued to intervene in support of the target, including unscheduled bond buying operations earlier in the month, but although outright purchases of JGBs picked-up in July ahead of the change in the target range, those purchases remain well below the run rate seen in 2022 and early 2023.

Market participants have continued to question the viability of the yield target in an environment of rising global bond yields and inflation. While inflation in Japan is running above its 2% target, wages growth remains below the 3% target and the output gap remains negative.