The Bank of Japan (BOJ, central bank) on Tuesday (20th) adjusted the yield curve control (YCC) program, which shocked the market and droveJPYStrong appreciation of more than 2%, Japanese stocks and US stock futures fell, US bonds and the dollar also fell.
According to Tuesday’s resolution, the Bank of Japan will allow Japan 10-Year Treasury Bond YieldIt rose as high as regarding 0.5%, up from 0.25% currently. The fluctuation range will be relaxed from the previous “±0.25%” to “±0.5%”.
But the BOJ left its yield target unchanged near 0 percent, as expected, and kept short-term rates at -0.1 percent.
The BOJ also announced it would “significantly” expand its bond-buying program from the current 7.3 trillion a month.JPYExpanded to 9 megabytesJPY ($67.5 billion). Economists had expected the BOJ to stay on hold but do more to improve the functioning of the bond market.
Archyde.com reported that the above adjustments showed that although the Bank of Japan has fine-tuned its ultra-loose monetary policy, it has not withdrawn its monetary stimulus.
Unexpected Decision-DrivenJPYClimbed from 137.16 before the decision was announced to a maximum of 133.12 JPYAgainst the US dollar, the Nikkei 224 index fell 2.5%, leading losses among Asian stocks, while the US stock S&P 500 futures index fell.
Japan 10-Year Treasury Bond Yieldjumped 20.5 basis points to the highest level since 2015,dollar indexdown 0.4%.
The Bank of Japan has always firmly defended 10-Year Treasury Bond YieldThe unexpected loosening of the cap, which serves as an anchor that indirectly helps keep borrowing rates low, might send shockwaves through global financial markets.
The Bank of Japan stated in a statement: “The Bank of Japan has decided to revise the implementation of the YCC to improve market operations and encourage a smoother yield curve while maintaining an accommodative financial situation. Through these steps, the Bank of Japan will aim to strengthen monetary policy under this framework.” Sustainability to achieve price targets.”
Shock waves in global markets
Mari Iwashita, chief market economist at Daiwa Securities, said: “The market’s focus is all on the joint agreement between the central bank and the government, and the vigilance has been greatly reduced. The Bank of Japan announced this adjustment, which will have a negative impact on the market.yenand the stock market have a strong impact. “
Amir Anvarzadeh, an analyst at Asymmetric Advisors who has tracked the Japanese market for 30 years, believes that as inflation in Japan heats up, it is only a matter of time before the Bank of Japan adjusts its policy. lift will driveJPYappreciate, and formJPYA self-fulfilling prophecy of further appreciation. “
UBS analysts predicted in October this year that US, Australian and French bonds would be the most affected, and stocks in developed markets would also feel the impact.JPYA recovery would also weigh on Japanese stocks.
Bank of Japan Horo 10-Year Treasury Bond YieldJapanese bank stocks rose sharply following the volatile range, as investors expected financial institutions’ earnings to improve. Mitsubishi UFJ Financial Group soared 9.6 percent, its biggest gain in six years, while Mizuho Financial Group also climbed.
Bank of Japan President Haruhiko Kuroda will expire in April next year, so before the decision-making meeting in December, the market began to deliberate on possible policy changes next year, but the decision announced on Tuesday still surprised the market.
Japanese media reported over the weekend that Japanese Prime Minister Fumio Kishida plans to revise a decade-long agreement with the Bank of Japan to make the 2% inflation target more flexible. Not long before the report came out, foreign media also reported that Kishida’s aides revealed that they might reach a new agreement with the Bank of Japan.
Kuroda has expressed a dovish stance several times in recent months, emphasizing the need for monetary stimulus until stronger wage growth occurs, ruling out that the Bank of Japan will take action to prevent devaluationJPYpossibility.
Kuroda has also said that a widening of the yield target range would be equivalent to a rate hike, a claim that has convinced many analysts that Japan is far from raising rates.
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said: “I think the Bank of Japan is approaching the stage of policy review. The Bank of Japan already owns more than 50% of Japanese government bonds, and it is obviously difficult to continue to implement policy. Now it is also time to re-examine the coalition agreement with the government. time.”
Analysts still expect Kuroda to emphasize his determination to keep monetary policy ultra-loose until inflation rises steadily to 2 percent in his post-meeting news conference this followingnoon.