The majority of central banks have communicated some level of pause in the rate trajectory. One of them is the focal point for the months ahead and it is the Bank of Japan. Last week BoJ surprised many by allowing the 10-year bond yield to be capped at 1% from the previous 0.5%. This was done after the review of inflation and they accepted that April 2023 estimates were lower. It is the first move made by the new Governor Ueda.
This action had a strong reaction in all Japanese financial assets. The 10-year Bond yield moved beyond 0.5% to 0.6% highest since June 2014. The currency fell by 0.6% on the day against USD. Nikkei fell by 0.4% on the day with a similar fall in futures. Given it was near expiry and month end. The actual reactions would seem in months ahead.
As the day ended it was analysed that the action was not that negative for now. But given that CPI is above 3% for almost a year now, there is a need for the central bank to at-least increase the market rate if not the policy rate.
Though most brokerages do expect any further yield changes this year. But there is a chance of CPI rising as the year ends due to energy and food costs that are already rising. This might force BoJ to review its inflation estimates again and especially for 2024. With this might come the moment when policy changes are forced to change.