Japan’s still negative neutral rate points to a very slow exit from ultra-lax policy by BoJ

The Bank of Japan (BoJ)’s monetary policy has been an outlier among major global central banks. It was not only the last central bank to end the unconventional monetary policy tools but also the first one to actively use those tools from the 90s.With declining neural rate, the BoJ confronted the zero nominal lower bound, a belief that the policy rate cannot fall below 0%, when the economy suffered from a prolonged deflation. In fact, our latest Cross-Expertise* revealed that Japan’s neutral rate remains negative even if much less than in the past, and still the lowest among developed economies...

Global public debt set to increase by 5.6pp of GDP to 99% by 2029

Our new $ rates scenario

The start of this year saw a reversal of the trend on dis inflation, a reassessment of rate expectations by the market and finally a change in tone from Fed speakers, including J.Powell . We changed accordingly our $ rates scenario for the next 18 months and now expect our 2-year OIS $ to end 2024 at 4.15%. The 10-year UST should decrease from 4.6% to 4.45% in September and 4.30% in December. In this scenario, the 2-10y segment of the UST curve should become flat during Q4 this year.