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☆ Bank of Japan has learnt danger of half-measures
▼ + stars: | 2023-01-18 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

The Bank of Japan (BOJ) made no adjustments to its yield-curve control (YCC) policy that keeps interest rates ultra-low on Wednesday. However, that tweak’s failure to reduce the need of central bank intervention has left the BOJ with little appetite for more compromises. Instead Kuroda rolled out a new tool to hold interest rates down, signaling intervention will continue. CONTEXT NEWSThe Bank of Japan on Jan. 18 kept its ultra-low interest rates policy unchanged and maintained a bond yield cap band it has struggled to defend. Under the amended rules, the central bank can offer funds of up to 10 years against collateral to financial institutions for both fixed and variable-rate loans.

☆ Yen sinks after BOJ sticks to ultra-easy policy
▼ + stars: | 2023-01-18 | by ( ) www.cnbc.com time to read: +2 min

Since then, speculation has swirled that the BOJ was likely to tweak its yield curve control (YCC) policy further. The Japanese yen weakened 2.06% versus the greenback at 130.80 per dollar on Wednesday, its biggest one-day percentage drop since June. The 10-year yield on Japanese government bond breached the BOJ's ceiling for fourth straight session on Wednesday after the decision. The Australian dollar gained 2.2% and Singapore dollar rose 1.9%. The Australian dollar rose 0.20% to $0.700, while the kiwi rose 0.45% to $0.646.

☆ Asian shares mixed, yen tumbles after BOJ keeps yield policy unchanged
▼ + stars: | 2023-01-18 | by ( Stella Qiu | ) www.reuters.com time to read: +4 min

read moreThe 10-year yield stayed at 0.5100% on Wednesday. In a Reuters poll, 97% of economists expected the BOJ to maintain its ultra-easy policy at the meeting. Mahjabeen Zaman, head of FX Research at ANZ, now expects any further rises in the Japanese yen might have to be delayed until April when the new BOJ governor assumes position. A survey of global fund managers by BofA Securities out on Tuesday showed that expectations of further appreciation in the Japanese yen in January were the highest in 16 years. After Bank of Japan decision, the dollar strengthened 2.4% to 131.18 yen , pulling away from Monday's seven-month low of 127.21 yen.

☆ Dollar steady, yen slips as traders brace for BOJ policy decision
▼ + stars: | 2023-01-18 | by ( Ankur Banerjee | ) www.reuters.com time to read: +2 min

SINGAPORE, Jan 18 (Reuters) - The U.S. dollar steadied on Wednesday, while the yen slipped as investors eagerly awaited the Bank of Japan's policy decision, which could set the stage for Tokyo to end its ultra-easy monetary policy. Since then, speculation has swirled that the BOJ was likely to tweak its yield curve control (YCC) policy further. The Japanese yen weakened 0.56% versus the greenback at 128.83 per dollar on Wednesday, easing off the seven month high of 127.25 it touched on Monday. The dollar index , which measures the safe-haven dollar against six peers, was flat at 102.400. The Australian dollar fell 0.04% at $0.698, while the kiwi rose 0.03% versus the U.S. currency at $0.643.

☆ Japanese yen weakens as Bank of Japan makes no changes to yield curve range
▼ + stars: | 2023-01-18 | by ( Jihye Lee | ) www.cnbc.com time to read: 1 min

Morning commuters in front of the Bank of Japan (BOJ) headquarters in Tokyo, Japan, on Monday, Jan. 16, 2023. The Bank of Japan made no changes to its yield curve control policy on Wednesday. The Japanese currency weakened against the U.S. dollar after the Bank of Japan surprised markets by keeping its yield curve tolerance band unchanged. The Japanese yen weakened 2.04% against the U.S. dollar shortly after the decision was announced and last stood at 130.35, hovering at its strongest levels since June, 2022. "Japan's economy is projected to continue growing at a pace above its potential growth rate," the Bank of Japan said in a statement.

☆ Pressure Rises on Bank of Japan for Further Policy Shift
▼ + stars: | 2023-01-17 | by ( Megumi Fujikawa | ) www.wsj.com time to read: 1 min

TOKYO—The Bank of Japan is under pressure to revise policy again at its meeting ending Wednesday after investors repeatedly attacked the central bank’s new 0.5% cap for the 10-year government bond yield. The battle between the BOJ and the markets has upended what are expected to be the final months of Gov. Haruhiko Kuroda ‘s decade in the job. He has devoted his term to keeping interest rates ultralow, a policy that many market players believe is likely to end this year with inflation in Japan nearing 4%.

☆ Yen perched near 7-month high as BOJ looms
▼ + stars: | 2023-01-17 | by ( Tom Westbrook | ) www.reuters.com time to read: +2 min

SINGAPORE, Jan 17 (Reuters) - The dollar drifted off multi-month lows on Tuesday, while the yen was perched near seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan. The euro reached a nine-month high on Monday at $1.0874, but was last loitering around $1.0830. The yen rose 3% against the dollar last week, and one-week implied volatility for dollar/yen is at its highest since March 2020. "The yen would explode higher, Japanese government bond yields would explode higher and global yields would go higher," he said. The New Zealand dollar held at $0.6394.

☆ Japan's yield control faces biggest test to date as BOJ debates policy
▼ + stars: | 2023-01-17 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

But with inflation exceeding its 2% target, the BOJ is facing its biggest test so far for its stimulatory policy, which is called yield curve control (YCC). The cap for the 10-year bond therefore became 0.5%. Market expectations of an early rate hike have boosted yields broadly, with the eight-year moving higher than the 10-year yield. In considering the BOJ's options, some analysts bet it will further widen the band and allow the 10-year yield to rise as far as 0.75%. Others expect the central bank to raise the 10-year yield target above 0%, change it to one targeting a shorter-dated maturity, or abandon it altogether.

☆ Yen perched near 7-month high as BOJ decision looms
▼ + stars: | 2023-01-17 | by ( ) www.cnbc.com time to read: +3 min

A bundle of Japanese 10,000 yen banknotes on a tray arranged at a branch of Resona Bank Ltd. in Tokyo, Japan. The dollar drifted up from multi-month lows on Tuesday, while the yen was perched near seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan. The yen rose 3% against the dollar last week, and one-week implied volatility for dollar/yen is at its highest since March 2020. "The yen would explode higher, Japanese government bond yields would explode higher and global yields would go higher," he said. The New Zealand dollar held at $0.6394.

☆ Asia shares slip ahead of expected weak China economic data
▼ + stars: | 2023-01-17 | by ( Kane Wu | ) www.reuters.com time to read: +4 min

HONG KONG, Jan 17 (Reuters) - Asia shares mostly slipped on Tuesday ahead of Beijing's expected release of weak fourth-quarter economic data, although investor sentiment about China's rebound remained positive even as the global economy edges closer to recession. MSCI's gauge of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) was down 0.18% at 0127 GMT. "I think investors will look through the Q4 GDP prints and focus on 2023," said Redmond Wong, Greater China market strategist at Saxo Markets Hong Kong. Hong Kong's Hang Seng Index (.HSI) opened down 0.3% while China's benchmark CSI300 Index (.CSI300) remained flat. Reporting by Kane Wu in Hong Kong; Editing by Jamie FreedOur Standards: The Thomson Reuters Trust Principles.

☆ BOJ policy meeting: Japan decides to maintain ultra-easy policy, leaves yield curve control targets unchanged
▼ + stars: | 2023-01-17 | by ( Laura He | ) edition.cnn.com time to read: +1 min

Hong Kong CNN —The yen plunged on Wednesday after the Bank of Japan decided to maintain its ultra-easy monetary policy, defying market expectations that rising inflation could force the central bank to move away from low interest rates. The BOJ kept its yield curve control (YCC) targets unchanged as it concluded a two-day policy meeting on Wednesday. It left the short-term interest rate at an ultra-dovish minus 0.1% and the 10-year Japanese Government Bonds (JGB) yield around 0%. The YCC policy is a pillar of the central bank’s effort to keep interest rates low and stimulate the economy. The unexpectedly hawkish decision caused stocks to tumble, while sending the yen and bond yields soaring.

Japanese investors hold a lot of foreign bonds - some $4.3 trillion in various debt instruments, of which $2.085 trillion is "portfolio investments." Around half of that is in U.S. assets such as Treasuries, agency debt and corporate bonds, and around a third in euro zone securities. Wholesale liquidation of Japanese investors' foreign bond holdings is unlikely barring a "very substantial" rise in Japanese yields from here. chartLast year, Japanese investor selling picked up pace as U.S. and euro zone borrowing costs rose. Hedged investors have cut back their exposure to foreign bonds, particularly banks and now life insurers, according to Setser and Etra.

chartAnalysts at Citi are among the few who think the BOJ will abolish its YCC policy. Either way, the era of Japanese capital flowing into higher-yielding foreign bonds seem to be over, for now. Japanese investors were net sellers last year, and repatriation pressures and rising hedging costs suggest they won't be buyers this year. World markets were in wait-and-see mode on Tuesday and held to pretty narrow ranges, despite the torrent of news flow and data. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Fund manager allocation to U.S. stocks in January collapses, BofA survey finds
▼ + stars: | 2023-01-17 | by ( Samuel Indyk | ) www.reuters.com time to read: +2 min

LONDON, Jan 17 (Reuters) - Fund managers' allocation to U.S. equities collapsed in January, with 39% saying they had an underweight position, the most since October 2005, a BofA survey of global investor views on Tuesday showed. Global growth optimism hit a one-year high, while inflation expectations have peaked, according to the global Fund Manager Survey of investors, who have combined assets under management of $772 billion. The survey showed investors turned bullish on euro zone equities, flipping their allocation to a 4% net overweight in January from a 10% net underweight in December. Fund managers also moved into emerging market stocks, increasing their net overweight to 26%, the highest since June 2021. The survey also showed inflation staying high as the biggest "tail risk" and the top "contrarian trades" as being 'long' stocks, U.S. stocks and tech versus 'short' bonds, emerging market stocks and utilities.

☆ Japan yields top BOJ cap for third day on eve of crucial policy decision
▼ + stars: | 2023-01-17 | by ( Kevin Buckland | ) www.reuters.com time to read: +2 min

The 10-year JGB yield rose 0.5 basis point to 0.505% as of 0820 GMT, although only one trade had been executed so far at 0136 GMT. "There is a strong cautiousness about taking fresh positions ahead of tomorrow," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. So far this month, the central bank has snapped up more than 17 trillion yen in debt, an unprecedented amount that calls into question the sustainability of the programme. The stakes are extremely high for Governor Haruhiko Kuroda and his colleagues, with speculators waiting to sniff out any hint that the central bank is headed for the exit door after decades of stimulus. "There's not much left for the BOJ to do except abandon the YCC framework," Muguruma said.

☆ Japanese Stocks Fall Ahead of BOJ Meeting
▼ + stars: | 2023-01-16 | by ( Dave Sebastian | Megumi Fujikawa | ) www.wsj.com time to read: 1 min

The Bank of Japan’s monetary-policy board is due to meet this week. Stocks in mainland China rose to start the week, while Japanese markets fell as the country’s long-term bond yields again breached a cap set by the Bank of Japan . The Nikkei 225 closed down 297.20 points, or 1.1%, to end the day at 25822.32. The Japanese yen weakened slightly against the U.S. dollar, hitting 128.69 by late afternoon trading in Hong Kong.

☆ Asian shares cautious, BOJ faces crunch policy decision
▼ + stars: | 2023-01-16 | by ( Wayne Cole | ) www.reuters.com time to read: +5 min

Earnings season gathers steam this week with Goldman Sachs, Morgan Stanley and the first big tech name, Netflix, among those reporting. However, it did try to get ahead of speculative sellers by announcing it would do another emergency round today, suggesting it was determined to defend its yield policy at least for now. THE YEN UN-ANCHOREDThe BOJ's uber-easy policy has acted as a sort of anchor for yields globally, while dragging down on the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and likely see the yen surge. "A soft-landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite."

☆ Yen jumps on hopes of BOJ policy shift; dollar slides to seven-month low
▼ + stars: | 2023-01-16 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

Similarly, the euro hit a fresh nine-month top of $1.0874, and was last 0.23% higher at $1.08565. "The confirmation of a deceleration in price pressures is building up hopes that CPI could fall further in coming months," said analysts at OCBC. The yen jumped roughly 0.5% to a high of 127.215 per dollar, and last bought 127.67 per dollar. Elsewhere, the British pound was last 0.23% higher at $1.2262, after earlier hitting a one-month peak of $1.2288. The kiwi rose 0.34% to $0.64065, having also touched a one-month top of $0.64255 earlier in the session.

☆ Analysis: Bank of Japan's yield curve control in danger as policy backfires
▼ + stars: | 2023-01-16 | by ( Leika Kihara | ) www.reuters.com time to read: +6 min

In a sign of its resolve to defend the yield cap, the BOJ on Monday announced plans to conduct additional, emergency bond-buying. To be sure, with global commodity prices falling, private analysts agree with Kuroda that inflation will slow back toward the BOJ's target later this year. It's better to remove the 10-year yield target, but overhauling YCC would raise questions of accountability." Data on Friday will likely show Japan's core consumer prices rose 4.0% in December, double the BOJ's target and a fresh 41-year high, a Reuters poll showed. "If markets continue to ask more from the BOJ, YCC may not last that long."

☆ Explainer: How does Japan's yield curve control work?
▼ + stars: | 2023-01-16 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

TOKYO, Jan 16 (Reuters) - The Bank of Japan's yield curve control (YCC) is under fierce market attack, as investors test the bank's commitment to capping bond yields with inflation above the BOJ's target. When the central bank had gobbled up half the bond market, it was hard to commit to buying at a set pace. YCC allowed the BOJ to buy only as much as needed to achieve its 0% yield target. The bank has tapered bond buying in times of market calm to lay the groundwork for an eventual end to ultra-easy policy. But markets may force the BOJ to relent, breaching the 10-year yield cap on Friday - before massive BOJ bond buying brought the rate back down.

☆ Explainer: What is happening in Japan's bond market?
▼ + stars: | 2023-01-16 | by ( Junko Fujita | ) www.reuters.com time to read: +4 min

TOKYO, Jan 16 (Reuters) - Market forces have pushed Japanese government bond yields above policy targets. Here is what is happening and what it means:WHAT IS JAPAN'S BOND MARKET? To stimulate lending, growth and inflation, the Bank of Japan has pinned short-term interest rates at -0.1% and 10-year yields around zero since 2016. That swap yield may indicate where the 10-year bond could be if the BOJ left the market alone. "Unless the BOJ reduces its presence in the market and changes its stance that it is controlling the yield level, market liquidity won't improve."

☆ Yen tests seven-month high ahead of BOJ policy decision; dollar wobbles
▼ + stars: | 2023-01-16 | by ( Rae Wee | ) www.reuters.com time to read: +2 min

SINGAPORE, Jan 16 (Reuters) - The Japanese yen held near an over seven-month peak on Monday, as traders, in the lead up to the Bank of Japan's monetary policy decision this week, ramped up bets that the central bank could make further tweaks to its yield control policy. The yen was last 0.1% lower at 128.01 per dollar, having surged to 127.46 per dollar on Friday, its highest since May last year. Markets have been pressing for the BOJ to shift away from its ultra-easy monetary policy, which on Friday caused the yield on Japan's benchmark 10-year government bonds to breach the central bank's new ceiling. With the BOJ due to announce its monetary policy decision on Wednesday, expectations are for further tweaks to its yield control policy or a full abandonment of it. Against a basket of currencies, the U.S. dollar index fell 0.13% to 102.13, languishing near Friday's seven-month low of 101.97.

☆ Japan's sharp wholesale price rise heaps pressure on BOJ's ultra-easy policy
▼ + stars: | 2023-01-16 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

The 10.2% year-on-year rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, exceeded a median market forecast for a 9.5% gain, Bank of Japan data showed. "While inflationary pressure from imports is easing, firms are still passing on rising input costs at home," said Takeshi Minami, chief economist at Norinchukin Research Institute. "But such price pressure will gradually weaken with commodity inflation peaking out, and major economies likely to stagnate in the first half of this year," he said. For 2022, wholesale prices rose 9.7% on average from the previous year, hitting a record high since comparable data became available in 1981. Data due out on Friday is expected to show Japan's core consumer prices rose 4.0% in December, double the BOJ's 2% target and a fresh 41-year-high, in a sign of rising living costs for households, according to a Reuters poll.

☆ Morning Bid: Let it go
▼ + stars: | 2023-01-16 | by ( ) www.reuters.com time to read: +2 min

A look at the day ahead in European and global markets from Anshuman DagaThe land of rising yields is the No. 1 focus of investors on Monday, as Japan's central bank may again let its bond-market peg go higher. Global inflation data due this week could underscore investors' expectations that the worst of the global price squeeze is over. A final read of euro zone inflation for December, as well as readings from Britain, Canada and Japan are due. Core inflation in all four regions is mostly rising and above target but the worst may have passed.

☆ Kuroda to attend Davos, depart shortly after closely-watched BOJ meeting
▼ + stars: | 2023-01-16 | by ( ) www.reuters.com time to read: 1 min

TOKYO, Jan 16 (Reuters) - Bank of Japan (BOJ) Governor Haruhiko Kuroda will travel to Davos and attend a panel at the annual World Economic Forum meeting on Friday, the central bank said on Monday. Kuroda will depart on Wednesday, when the BOJ concludes its two-day policy meeting that begins on Tuesday, and return to Japan on Sunday, the BOJ said in a statement. He will attend an hour-long session discussing the global economic outlook at 11 a.m. Friday local time, it said. Markets are rife with speculation the BOJ could tweak its yield curve control (YCC) policy at this week's policy meeting, as rising inflation and prospects of higher wages put upward pressure on long-term interest rates. Reporting by Leika Kihara; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

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