“Bank of Japan announces multilateral policy review and abolishes forward guidance, foreign investors predict yen appreciation”

At the Monetary Policy Meeting held on the 28th, the Bank of Japan announced that it would conduct a multilateral review of its policy over a period of one to one and a half years, and that it would abolish its forward guidance, which serves as a policy guideline for the future. Some foreign investors are predicting that the yen will continue to appreciate in the foreign exchange market.

After the Bank of Japan’s announcement, the dollar/yen exchange rate temporarily fell to the low 135 yen level in the foreign exchange market. The bond market turned upward as the current easing measures such as the yield curve control (YCC) policy were maintained. The weak yen and the maintenance of the easing policy were favorably received by investors, and the TOPIX and Nikkei Stock Average increased the range of increase in the stock market.

Perspectives of market participants

Commonwealth Bank of Australia strategist Joseph Caperso

• He sees the change in the BOJ’s statement as a step toward ending the YCC and negative interest rate policies in the coming months.We have become more confident in our view that the Bank of Japan will tighten monetary policy soon.
• If today’s decision is digested among market players, the yen will make up for losses early next week

Chal Chanana, Senior Market Strategist, Saxo Capital Markets

• Ueda’s new governor appears to be trying to improve the central bank’s image in communications
• Today’s announcement is making it clear that it leaves the door open for policy tweaks, suggesting a possible yen appreciation.

David Forrester, Senior FX Strategist, Crédit Agricole CIB (Singapore)

• New Forward Guidance Shifts to Neutral Bias, Positive for JPY
• Investors could see such a change as a harbinger of a major change in monetary policy.

Related article