Goldman Sachs: Bank of Japan to remove its negative rate next

The Bank of Japan's next move could be a reversal in its negative rate (-0.1%), as Goldman Sachs Group Inc. said. This step can be taken due to an unexpected widening of the government bond yield band (JGB).

Naohiko Baba, Goldman Sachs economist, believes that the regulator is focused on improving the JGB market functioning. Therefore, the Central Bank of Japan is likely to abandon its policy of negative interest rates.

As the expert noted, the move comes as part of building resilience for the BOJ’s yield curve control (YCC).

Central Bank Chairman Haruhiko Kuroda said that the widening of the target band shows no sign of higher interest rates in the country. The regulator's actions were aimed solely at improving the market's functioning.

Further expansion of the JGB target band is considered unlikely, according to Haohiko Baba. However, the Bank of Japan is able to raise interest rates or terminate YCC.