(Bloomberg) -- A recent drop in global bond yields has created favorable conditions for the Bank of Japan to scrap its yield curve control program this month, according to a former BOJ executive director in charge of monetary policy. 

“There’s a possibility in April if you consider the current circumstances objectively,” former director Kazuo Momma said in an interview Tuesday. “Long-term yields won’t rise abruptly even if the YCC is scrapped” as long as the market environment continues to have little momentum for higher yields.

The remarks suggest new BOJ Governor Kazuo Ueda’s first policy meeting could result in surprise changes as he inherits a decade’s worth of massive monetary easing orchestrated by outgoing chief Haruhiko Kuroda. 

Momma said any change to the YCC has to come without prior warning, a stance that was also indicated last week by Shinichi Uchida, the BOJ’s key policy architect.

Momma didn’t rule out the possibility that the BOJ will decide to leave the yield curve control program unchanged at its April 27-28 gathering. Some economists have said that Ueda, who is assuming the governorship Sunday, is unlikely to make a policy shift this month after global financial markets came under strain due to banking crises in the US and Europe. 

Japan’s 10-year bond yields plunged after the BOJ’s March policy meeting, which came around the same time as news of trouble at Silicon Valley Bank. The yield was at around 0.46% Wednesday morning, below the BOJ’s ceiling of 0.5%. 

June was the most popular timing among economists for expecting a tightening step from the BOJ, according to a Bloomberg survey last month. The poll was conducted shortly after Ueda, at his first parliamentary hearings, indicated he was in no rush to change monetary stimulus policy. Some 41% of 49 economists expected the change in June, followed by 20% in April.

Any change to the YCC will aim to reduce the side effects of monetary easing, and will not be a step toward policy normalization, Momma said. Therefore it won’t be at odds with Ueda’s recent remarks that monetary easing must be continued, he said. 

The YCC adjustments could come with a shift in forward guidance to signal that the bank won’t raise rates until it’s certain it will achieve its 2% price target, Momma said. The bank is also likely to pledge to continue its large-scale bond buying to avoid a sudden surge in yields, he added. 

“I don’t expect a change in the policy rate of -0.1% at all for the next 18 months,” Momma said. “The BOJ won’t know if the 2% inflation target will be met until around summer 2024.”

BOJ watchers will also be closely scrutinizing the central bank’s new quarterly economic projection that will be released after the April policy meeting. Momma, who previously saw no chance of Japan meeting its 2% target, said the odds of achieving it have risen to 20% as businesses continue to pass higher costs onto consumers. 

The bank is likely to upgrade its price forecast above 2% for the year starting this month while keeping its predictions below that level in the two following years, said Momma, who is also a former BOJ chief economist.  

Either way, Ueda will be facing a difficult choice as he steps into Kuroda’s shoes, according to Momma.

“It’s hell to continue with YCC and it’s hell to scrap YCC,” he said. “It’s a considerably thorny policy framework.”

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