The Bank of Japan (BOJ, central bank) on Tuesday (20) changed the yield curve control program (YCC), which shocked the market and droveJPYSharp 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 bill yieldIt’s up to about 0.5%, up from 0.25% now. The fluctuation range will be reduced from the previous “±0.25%” to “±0.5%”.
But the BOJ left its near-0% yield target unchanged, as expected, and kept short-term rates at -0.1%.
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 expected the BOJ to sit back but do more to improve the functioning of the bond market.
Reuters reported that the above adjustments showed that although the Bank of Japan fine-tuned its ultra-expansionary monetary policy, it has not withdrawn its monetary stimulus.
Guided unexpected decisionJPYHas risen from 137.16 before decision announcement to a high of 133.12 JPYAgainst the US dollar, the Nikkei 224 index fell 2.5%, carrying losses among Asian stocks, while the US S&P 500 stock futures index fell.
Japan 10-year Treasury bill yieldjumped 20.5 basis points to the highest level since 2015,dollar indexdown 0.4%.
The Bank of Japan has always defended steadfastly 10-year Treasury bill yieldThe unexpected easing of the cap, which serves as an anchor that indirectly helps keep lending rates low, could send shockwaves through global financial markets.
The Bank of Japan said in a statement: “The Bank of Japan has decided to review 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 within this framework.” Sustainability to achieve price targets.”
Shockwaves in global markets
Mari Iwashita, chief market economist at Daiwa Securities, said: “The market’s focus is on the joint arrangement between the central bank and the government, and supervision has been significantly reduced. The Bank of Japan has 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 followed the Japanese market for 30 years, believes that with inflation rising in Japan, it is only a matter of time before the Bank of Japan adjusts its policy.JPYappreciate and trainJPYA self-fulfilling prophecy of further appreciation. “
UBS analysts predicted in October this year that US, Australian and French bonds would be hit the hardest, and that developed market equities would also be affected.JPYA recovery would also weigh on Japanese equities.
Bank of Japan Horo 10-year Treasury bill yieldJapanese bank stocks rose sharply after the volatile band as investors expected an improvement in financial institutions’ earnings. Mitsubishi UFJ Financial Group climbed 9.6%, its biggest gain in six years, while Mizuho Financial Group also climbed.
Bank of Japan President Haruhiko Kuroda is due to expire in April next year, so before the decision-making meeting in December, the market started deliberating 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 10-year deal with the Bank of Japan to make the 2% inflation target more flexible. Not long before the report was released, foreign media also reported that Kishida’s aides revealed they could reach a new deal with the Bank of Japan.
Kuroda has repeatedly voiced a dovish stance in recent months, emphasizing the need for monetary stimulus until stronger wage growth occurs, ruling out Bank of Japan action to prevent devaluationJPYpossibility.
Kuroda also said that a broadening of the target yield range would equate to a rate hike, a statement that has convinced many analysts that Japan is a long way from raising rates.
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said: “I think the Bank of Japan is getting close to the policy review stage. The Bank of Japan already owns more than 50% of Japanese government bonds and it is obviously difficult continue implementing the policy Now is also the time to review the coalition agreement with the government.
Analysts still expect Kuroda to emphasize his determination to keep monetary policy ultra-expansive until inflation climbs steadily to 2% in his post-conference news briefing this afternoon.
