Much of that public anger has centred on Kuroda, who was handpicked by former prime minister Shinzo Abe as BOJ governor a decade ago to rev up sluggish consumer demand with massive monetary stimulus. Kuroda stressed the move was not a prelude to a bigger tweak to YCC and an eventual exit from ultra-easy policy, sticking to his view that Japan’s fragile economy still needed support. Speaking in Davos after the BOJ’s decision, trade minister Yasutoshi Nishimura, for one, said Japan was nearing the phase where easy policy could be stopped as wages rise. “We decided to take the step because the entire yield curve was under strong upward pressure, heightening the risk of the 10-year yield exceeding our upper limit,” a BOJ official told Reuters about Wednesday’s move. The BOJ’s emergency offer to buy super-long bonds also drove down yields on longer-dated maturities. The 20-year JGB yield lost 8.5 basis points to 0.73% and the 30-year JGB yield was down 10 basis points at 0.970%.
That way, they don’t have to make as much of a change in policy to get the result they want. But this also leaves the markets unsettled, and increases volatility, like we’ve seen over the last few days. Any delay would also also put more pressure on Japanese Prime Minister Fumio Kishida, who pledged to help consumers cope with rising living costs at a cabinet reshuffle last week. He also vowed to ensure the world’s third-largest economy will emerge meaningfully out of deflation with wage growth that consistently exceeds the rate of inflation. Raising interest rates prematurely may derail growth, while an excessive delay in tightening policy would weigh further on the Japanese yen and raise the risks of financial fragility.
- The BOJ also slashed its economic growth projections for the next two fiscal years, amid worries slowing global demand will weigh on the export-reliant economy.
- He also said the government “always communicates closely with the BOJ,” but declined to comment on specifics.
- Investing.com– Consumer inflation in Japan’s capital grew slightly less than expected in September amid some cooling in consumer spending, although the reading still remained above the Bank of…
- “Whatever message the current BOJ leadership sends out, market expectations of a future tweak to YCC will continue,” said Toru Suehiro, chief economist at Daiwa Securities.
- The theory that the BOJ operates under is that by surprising the market with changes, it has an increased effect.
A list of scheduled dates of the meetings; policy statements; minutes of the meetings; and the Outlook for Economic Activity and Prices (the Outlook Report).
When is the BoJ Interest Rate Decision and how could it affect USD/JPY?
Stocks were hammered as rates increased following hotter-than-expected initial jobless claims and the Fed’s less-than-impressive performance on September 20. Investing.com– Consumer inflation in Japan’s capital grew slightly less than expected in September amid pepperstone review some cooling in consumer spending, although the reading still remained above the Bank of… Japan’s gross domestic product growth for the April-June quarter was revised down to an annualized 4.8% from the preliminary 6% print due to weak capital spending.
- The BOJ also said it would increase monthly purchases of Japanese government bonds (JGBs) to 9 trillion yen ($67.5 billion) per month from the previous 7.3 trillion yen.
- That policy runs smoothly when inflation and economic growth are subdued, but hits trouble when prices creep up, as they have over the past year, putting upward pressure on the 10-year bond yield and forcing the BOJ to ramp up bond buying.
- “Hopefully this could be the start of a virtuous cycle for economic growth, but it’s still too early to say whether that will pan out. We probably need another six to 12 months to see where we are on that front.”
- BoJ maintains offer to buy 10-year JGBs at 1.0% daily through fixed-rate market operations.
- “Comments from the BOJ Governor seems to reveal a continued lean into the dovish camp, at least for now, which led recent hawkish bets to question if they have got ahead of themselves,” said Yeap Junrong, a market strategist with IG Asia in Singapore.
Investing.com – USD/CAD fell Tuesday, with just a day to go until the Bank of Canada is expected to deliver its second-straight rate hike after following a surprise hike last month. Investing.com – The U.S. dollar slumped to its lowest level in two months in early European hours Wednesday ahead of a crucial U.S. inflation report, while sterling climbed to a fresh 15-month high on… The BOJ stressed that it wasn’t actually a change in policy, because the midpoint of the target remained the same. It’s worth noting that the US Dollar Index (DXY) rallied the most since March the previous day after the US growth numbers impressed the greenback bulls. However, chatters about the likely BoJ’s tweak to its YCC policy exert downside pressure on the USD/JPY price.
The Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero. As inflation rose, the central bank introduced changes to the yield curve control, allowing the 10-year yield on the Japanese Government Bond (JGB) to move in a wider band. Bottom line, the central bank has decided to intervene only when the 10-year JGB yield moves past 1.0%. TOKYO, Oct 6 (Reuters) – The Bank of Japan could raise its 1% hard cap set for long-term interest rates as its next policy move if the 10-year bond yield threatens to breach that level, Columbia University academic Takatoshi Ito told Reuters in an interview. “This step will allow us to push down longer-term interest rates, without directly affecting supply and demand of the cash Japanese government bond (JGB) market,” Kuroda told a news conference.
Monetary Policy Measures
“It wasn’t as if any time frame for achieving our price target had changed. I thought that by ruling out the possibility completely would bind the discussion of upcoming policy-setting meetings,” Ueda said Friday. The move to broaden the permissible range for 10-year JGB yields of around plus and minus 0.5 percentage points from its 0% target to 1% was seen as the start of a gradual departure from the yield curve control policy enacted by Ueda’s predecessor. Japanese policymakers have already turned down the expectations of any significant moves from the Bank of Japan (BOJ).
Exclusive: Banks in UK assess China risks after being stung by Russia sanctions
Escalating geopolitical tensions ahead of the weekend weigh on T-bond yields and provide a boost to XAU/USD, which remains on track to gain nearly 5% this week. The Bank of England (BoE) somehow surprised market players on Thursday as the central bank decided to leave the benchmark rate unchanged at 5.25% after fourteen hikes in a row. Bets on additional rate hikes decreased, with one more 25 bps hike in the docket, yet the odds for a rate hike in November, however, slid from 81% before the announcement to 64% afterwards. TOKYO, Dec 20 (Reuters) – The Bank of Japan shocked markets on Tuesday with a surprise tweak to its bond yield control that allows long-term interest rates to rise more, a move aimed at easing some of the costs of prolonged monetary stimulus. The 10-year Japanese government bond (JGB) yield hit a six-year high of 0.268% in early trade on Friday, before retreating to 0.22% after the central bank’s policy decision.
Likewise, if the BoJ has a dovish view of the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish. As inflation in Japan has been exceeding the BoJ’s 2% target for over a year, policymakers have been under increased pressure to change course and tighten monetary policy. Kuroda’s last policy meeting will be held on March 9-10, ending a decade helming the bank that brought about radical monetary stimulus but ultimately failed to meet its objective of sustainably reviving anemic consumer demand. “By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won’t make big monetary policy changes under Kuroda.” The BOJ’s decision to beef up its key market operation tool is expected to help curb rises in long-term interest rates but importantly underscores its dogged commitment to defend the cap.
After a crash to the 200-day MA, is this the bottom, or could silver retest its March lows? A Reality CheckWhile the permabulls proclaimed that interest rates were irrelevant and that silver had… “Comments from the BOJ Governor seems to reveal a continued lean into the dovish camp, at least for now, which led recent hawkish bets to question if they have got ahead of themselves,” said Yeap Junrong, a market strategist with IG Asia in Singapore. Alternatively, an absence of moves and the policymakers’ support the easy money could recall the USD/JPY buyers.
How do interest rates influence the price of Gold?
But now that the situation calls for the BOJ to start tightening – or at least, stop the extraordinary easing – then there can be policy changes. Everyone got a reminder of that at the last BOJ meeting, when it increased the band of its YCC, effectively allowing for more tightening of the monetary policy. USD/JPY pares intraday losses during etoro the five-day losing streak at the lowest level in a week ahead of the BoJ event. Despite core inflation exceeding the Bank of Japan’s stated 2% target for 17 consecutive months, BOJ officials have been cautious about exiting its radical stimulus, which was put in place to combat decades of deflation in the world’s third-largest economy.
The US Dollar is supported by generalized optimism ahead of the BoJ announcement despite the 2-year Treasury note yield peaking at a multi-year high of 5.202% in the Fed’s aftermath, its highest since 2006. With inflation exceeding the BOJ’s 2% target for more than technologies for game developers a year, many analysts expect the board to revise up this year’s price forecast. Ito said the BOJ’s decision to raise the de-facto ceiling to 1.0% from 0.5% was made at the right time and reflected the bank’s hopes of avoiding being forced to ramp up bond purchases.
Investing.com– Most Asian currencies kept to a tight range on Wednesday amid continued fears of higher U.S. interest rates, while recent slumps in the Chinese yuan and Japanese yen saw traders… Such concerns over the weak yen, however, have not deterred the BOJ from defending its cap for its 10-year yield target by ramping up bond purchases. The growing policy divergence between Japan and the rest of the world has pushed the yen to 24-year lows against the U.S. dollar, threatening to cool consumption by boosting already rising import costs. Markets face a decisive week, with the Fed and the ECB likely to put a halt to their rate hike cycles
Markets will now focus on how long rates will stay high—as well as the Fed’s balance…