PIMCO is an investment management firm, this is their latest on the BOJ

To be honest, when I saw the headline I read "New Neural Yield Curve" and I thought, wow this will be interesting

But its not neural, its neutral ... so not quite so interesting. Never mind.

PIMCO have been on about 'new neutral' rates (i.e. they are lower) since at least 2014 and this is a continuation of that theme:

  • We have argued that neutral rates should be substantially lower in this post-Lehman-crisis economy than in the past, and that central banks should remain substantially accommodative and be rather patient in any policy normalization.

BUT ... PIMCO says in the case of Japan:

  • The New Neutral was in fact "new" for most countries, but not for Japan: The country's neutral rates were depressed even before the global financial crisis, due to its own secular dynamics, such as a rapid decline in productive ages of the population.

PIMCO do not have a bright view for Japan:, the problems can be (brutally) summarised as:

  • Inflation expectations not anchored to the BOJ 2% inflation target
  • low (and negative) neutral rates

Their outlook:

  • The war against deflation will be a long one, most likely lasting beyond the end of Kuroda's term in April 2018. ... The bank will have to remain significantly accommodative for at least several years

There is plenty more at the full text, here. none of it very optimistic