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☆ Morning Bid: Land of the rising yields
▼ + stars: | 2022-12-20 | by ( ) www.reuters.com time to read: +5 min

A look at the day ahead in U.S. and global markets from Mike Dolan. In the last major central bank set-piece of the year, the BOJ raised its long-standing cap on 10-year Japanese government bond yields by quarter of a percentage point to 0.5% - sending those yields and the yen surging and squeezing stocks further. Yet most investors felt that was only likely when BOJ chief Haruhiko Kuroda stepped down in April. Japan's 10-year bond yields immediately almost doubled close to the new 0.5% target, with U.S. Treasury and European sovereign debt yields rising in their slipstream. Apart from the timing, the BOJ move marks a significant moment in draining the world economy of central bank liquidity pumped in to support economies during the pandemic.

☆ The Bank of Japan's latest move is a step toward tightening, says fmr. Fed Governor Randy Kroszner
▼ + stars: | 2022-12-20 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailThe Bank of Japan's latest move is a step toward tightening, says fmr. Fed Governor Randy KrosznerFormer Fed Governor Randy Kroszner joins 'Closing Bell' to discuss the Bank of Japan's focus on the 10-year rather than the whole yield curve, the BOJ's handling of heightened inflation, and expectations for the next Central bank Governor of Japan.

☆ Analysis: As Bank of Japan switches gears, roaring dollar hits the skids
▼ + stars: | 2022-12-20 | by ( Amanda Cooper | ) www.reuters.com time to read: +5 min

Reuters GraphicsThe dollar has risen 9% this year, as the Federal Reserve has jacked up interest rates to combat inflation at 40-year highs. As other central banks, from the Bank of England, to the European Central Bank, and the Reserve Bank of Australia, have raised their own rates, dollar bulls have run out of puff. The close relationship between Japanese monetary policy and U.S. Treasuries adds another twist to the story. It all boils down to whether Japanese investors have hedged their Treasury exposure or not, he said. But the stress is on "at the margin", not least because of the sheer size of Japanese investors' holdings of U.S. debt, analysts said.

☆ BOJ changes yield curve control, jolts markets with surprise monetary policy
▼ + stars: | 2022-12-20 | by ( ) edition.cnn.com time to read: +3 min

The Bank of Japan shocked markets Tuesday with a surprise tweak to its bond yield controls that allows long-term interest rates to rise more, a move aimed at easing some of the costs of prolonged monetary stimulus. Shares tanked, while the yen and bond yields spiked following the decision, which caught offguard investors who had expected the BOJ to make no changes to its yield curve control (YCC) until Governor Haruhiko Kuroda steps down in April. But the central bank kept its yield target unchanged and said it will sharply increase bond buying, a sign the move was a fine-tuning of existing ultra-loose monetary policy rather than a withdrawal of stimulus. The 10-year Japanese government bond (JGB) yield briefly spiked to 0.460%, close to the BOJ’s newly set implicit cap. Kuroda has repeatedly said he saw no need for the BOJ to tweak YCC, including taking immediate steps to address the side-effects such as the distortion it was creating in the bond market.

The Bank of Japan delivers the last G7 central bank policy decision of the year on Tuesday, and those hoping that a traditional dose of BOJ dovishness will ease the selling pressure currently slamming world markets may be disappointed. To be sure, the BOJ will almost certainly keep its key interest rate at an ultra-loose -0.10% and maintain its 'yield curve control' policy, but the winds of change are starting to blow. A hawkish turn from the BOJ would put a year-end rebound even further out of reach for world stocks. China's central bank, meanwhile, is likely to keep benchmark lending rates unchanged for a fourth straight month on Tuesday, although expectations for monetary easing are rising. Three key developments that could provide more direction to markets on Tuesday:- Japan policy decision- China policy decision- RBA meeting minutesReporting by Jamie McGeever in Orlando, Fla.; Editing by Deepa BabingtonOur Standards: The Thomson Reuters Trust Principles.

☆ Japan set to keep ultra-low rates but doubts over yield cap grow
▼ + stars: | 2022-12-19 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

The BOJ's decision would contrast with last week's interest rate hikes by its U.S. and European counterparts aimed at countering persistent price pressures. At a two-day policy meeting ending on Tuesday, the BOJ is widely expected to keep unchanged its yield curve control (YCC) targets set at -0.1% for short-term interest rates and around zero for the 10-year bond yield. Markets are rife with speculation the BOJ will tweak its yield cap and allow long-term interest rates to rise more when a new central bank governor takes the helm. "When prices start rising, it's very hard to maintain YCC," he said, pointing out the chance of a hike to the 10-year yield target next year. Sources have told Reuters that debate over how to remove the BOJ's yield cap could gather pace next year, provided wages perk up and major economic risks remain contained.

☆ Stocks steady, yields rise as rate risks cloud 2023 outlook
▼ + stars: | 2022-12-19 | by ( Danilo Masoni | ) www.reuters.com time to read: +5 min

By 1152 GMT, the index was broadly unchanged after a heavy week for rate increases on Friday sent it to its lowest point since Nov. 10. Long-term borrowing costs rose for a fourth straight session and short-dated yields remained not far off their highest levels in more than a decade. It wreaked havoc even on rate markets," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan. Ten-year Treasury yields rose 4 basis points (bps) to 3.522%. Gold inched 0.1% higher at $1,764 an ounce, as a softer dollar countered pressure from expectations of higher U.S. rates.

Summary Global stocks index up 0.1%Japan could tweak inflation target - sourceshttp://tmsnrt.rs/2yaDPgnhttp://tmsnrt.rs/2egbfVhMILAN, Dec 19 (Reuters) - World stocks inched higher on Monday but stayed near 6-week lows as investors started the year's last full trading week still mindful of interest rate hike risks to the economy in 2023. By 0902 GMT, the index rose 0.1% after a heavy week for interest rate increases on Friday sent it to its lowest point since Nov. 10. It wreaked havoc even on rate markets," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan. "Except for the BOJ and perhaps the Bank of England, there's little confidence in the other central banks. Japan's Nikkei (.N225) fell 1.05% to a six-week low and the yen rose 0.5% to 135.9 per dollar.

☆ Rising interest rates give pause to festivity for markets
▼ + stars: | 2022-12-19 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

Japan's Nikkei (.N225) fell 1.1% and the yen , which rose about 0.4% to 136.20 per dollar, was the biggest mover in otherwise quiet currency trade. Japan will consider revising a 2% inflation target agreed between the government and central bank next year, four sources familiar with the matter told Reuters. The yen has been the worst-performing G10 currency this year, with a 15% loss against the dollar, driven mainly by the gap between rising U.S. rates and anchored Japanese rates. U.S. rates were steady last week, despite the Fed projecting further hikes ahead, as traders fret that interest rates are already high enough to start hurting economic growth. It is down 20% for the year and has failed in several attempts at sustainably trading above its 200-day moving average.

☆ Yen gains on potential Japan govt move for more flexible inflation target
▼ + stars: | 2022-12-19 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

[1/2] Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. The yen was last 0.4% stronger at 136.19 per dollar, after jumping more than 0.5% to a high of 135.78 earlier in the session. The Japanese government will consider revising next year a joint statement it signed with the BOJ in 2013 that commits the central bank to meeting a 2% inflation target as soon as possible, sources told Reuters. That policy stance and the resulting interest rate differentials with the rest of the world have caused the yen to plunge more than 15% this year. A slew of central bank meetings last week saw the BoE, the U.S. Federal Reserve and the European Central Bank (ECB) each raising rates by 50 basis points, with the Fed and the ECB delivering hawkish messages and pledging more hikes ahead, even at the risk of hurting growth.

☆ BOJ may unwind ultra-easy policy in 2023, nearly half of economists say- Reuters poll
▼ + stars: | 2022-12-19 | by ( Kantaro Komiya | ) www.reuters.com time to read: +4 min

TOKYO, Dec 19 (Reuters) - The Bank of Japan (BOJ) could unwind its ultra-loose monetary policy between March and October next year, according to almost half the economists in a Reuters poll on Monday, much sooner than predicted in previous projections. Of 26 economists polled, 11 expect the central bank will unwind its ultra-loose policy between March and October, the Dec. 8-15 poll found. Half, or 13, said the BOJ wouldn't scale back until 2024 or later and two still expect the next move to be more easing of policy. The most common means tipped by analysts for the BOJ to unwind stimulus would be a tweak to its forward guidance, according to 15 respondents. DEFENCE WITHOUT DEBTAsked about how Japan's defence budget spending increase would ideally be funded, nine of 20 economists chose tax hikes.

☆ Yen jumps on possible Japan govt move for more flexible inflation target
▼ + stars: | 2022-12-19 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

[1/2] Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. The yen was last 0.34% stronger at 136.24 versus the dollar, after having jumped more than 0.5% to a high of 135.78 earlier in the session. The Japanese government will consider revising next year a joint statement it signed with the BOJ in 2013 that commits the central bank to meeting a 2% inflation target as soon as possible, sources told Reuters. That policy stance and the resulting interest rate differentials with the rest of the world have caused the yen to plunge more than 15% this year. A slew of central bank meetings last week saw the BoE, the U.S. Federal Reserve and the European Central Bank (ECB) each raising rates by 50 basis points, with the Fed and the ECB delivering hawkish messages and pledging more hikes ahead, even at the risk of hurting growth.

☆ Festivity on hold for stocks as rate hikes loom
▼ + stars: | 2022-12-19 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.1%. Japan will consider revising a 2% inflation target agreed between the government and central bank next year, four sources familiar with the matter told Reuters. The yen has been the worst-performing G10 currency this year, with a 15% loss against the dollar, driven mainly by the gap between rising U.S. rates and anchored Japanese rates. U.S. rates were steady last week, despite the Fed projecting further hikes ahead, as traders fret that interest rates are already high enough to start hurting economic growth. It is down 20% for the year and has failed in several attempts at sustainably trading above its 200-day moving average.

☆ Festivity on hold for stocks as rate hikes beckon
▼ + stars: | 2022-12-19 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

Japan's Nikkei (.N225) fell 1% in early trade and the yen , which rose about 0.5% to 136.00 per dollar, was the biggest mover in quiet currency trade. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.4%. The yen has been the worst-performing G10 currency this year, with a 15% loss against the dollar, driven mainly by the gap between rising U.S. rates and anchored Japanese rates. U.S. rates were steady last week, despite the Fed projecting further hikes ahead, as traders fret that interest rates are already high enough to start hurting economic growth. It is down 20% for the year and has failed in several attempts at sustainably trading above its 200-day moving average.

☆ Japan govt to consider revising joint statement with BOJ - sources
▼ + stars: | 2022-12-19 | by ( Tetsushi Kajimoto | Leika Kihara | ) www.reuters.com time to read: +4 min

TOKYO (Reuters) -The Japanese government will consider revising next year a joint statement it signed with the Bank of Japan (BOJ) in 2013 that commits the central bank to meeting a 2% inflation target as soon as possible, sources told Reuters. REUTERS/Kim Kyung-Hoon/File PhotoThe revision, if made, would be done after a new BOJ governor is appointed in April, they said, a move that may heighten the chance of a tweak to incumbent governor Haruhiko Kuroda’s ultra-loose monetary policy. There is no consensus within the government on what changes could be made, as much will depend on the views of the new BOJ governor, said four government and ruling party officials with knowledge of the matter. “Given we’ll have a new BOJ governor, there will likely be a new statement,” one of the government officials said. Kyodo news agency reported on Saturday that the government is set to revise the joint statement to make the BOJ’s inflation target a more flexible goal, with some leeway.

☆ Japan to consider revising Abe-era deflation fighting mandate - sources
▼ + stars: | 2022-12-19 | by ( Tetsushi Kajimoto | Leika Kihara | ) www.reuters.com time to read: +5 min

TOKYO (Reuters) - Japan next year will consider revising its decade-old blueprint for fighting deflation, sources said, as financial markets bet that a weak yen and rising consumer prices will force the central bank to finally drop its ultra-loose monetary policy. The pledge has served as the backbone of Kuroda’s radical monetary stimulus and justification for keeping Japan’s interest rates ultra-low, even as other central banks tighten monetary policy to combat stubbornly high inflation. Kyodo news agency reported on Saturday that the government is set to revise the joint statement to make the BOJ’s inflation target a more flexible goal, with some leeway. SHIFTING FOCUSA revision to the joint statement would mark the final nail in the coffin for former premier’s Abenomics stimulus programme, which relied heavily on Kuroda’s massive stimulus to pull Japan out of deflation. Analysts say any revision that waters down the status of the BOJ’s 2% inflation target could serve as a trigger for phasing out Kuroda’s stimulus programme.

☆ Yen rises on report of Japan govt move for more flexible inflation target
▼ + stars: | 2022-12-19 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

[1/2] Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. The yen was last 0.6% stronger at 135.91 per dollar, after having touched a high of 135.80 earlier in the session. Prime Minister Fumio Kishida is aiming to make the BOJ's 2% inflation target a more flexible goal by revising its decade-old joint statement with the central bank, Kyodo news agency reported on Saturday. The current statement commits the BOJ to achieving its inflation target "at the earliest date possible", and the BOJ has steadfastly stuck to its dovish monetary policy. A slew of central bank meetings last week saw the BoE, the Federal Reserve and the European Central Bank (ECB) each raising rates by 50 basis points, with the Fed and the ECB delivering hawkish messages and pledging more hikes ahead, even at the risk of hurting growth.

☆ Traders will anxiously watch the Bank of Japan
▼ + stars: | 2022-12-19 | 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

HONG KONG, Dec 19 (Reuters Breakingviews) - Shorting the Bank of Japan (8301.T) is the trade of 2023. Gyrations in Japanese bond yields resulting from an abrupt increase in benchmark interest rates could force indebted domestic entities to dump overseas assets, roiling global markets. The question on traders’ collective mind is what happens when the central bank finally adjusts its “yield-curve control” policy, or YCC, which has held down government bond yields for more than six years. A higher-than-expected wage hike resulting from springtime negotiations could persuade officials that salaries are offsetting higher prices, bolstering the case for normalising interest rates. Meanwhile higher interest rates would allow Japanese companies to earn better returns on their 325 trillion yen ($2.4 trillion) cash hoard.

☆ Morning Bid: Yen for change
▼ + stars: | 2022-12-19 | by ( ) www.reuters.com time to read: +4 min

But even though the BoJ is unlikely to change that stance at this week's policy meeting, some change appears to be afoot next year as central bank chief Haruhiko Kuroda ends his second five-year term in April. In numbers due for release on Thursday, Japan's core consumer price inflation rate is expected to have ticked up to 3.7% last month. That said, futures markets still aren't buying Fed policymaker indications that official rates will go above 5% and stay there all next year. After closing at their worst levels in over a month on Friday, U.S. stocks are set for a steadier open today. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ BOJ must eye rate hike, shift to more flexible policy, says ex-deputy governor
▼ + stars: | 2022-12-19 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

Yamaguchi, who is considered a candidate to become next BOJ governor, said Japan is already seeing signs of "home-made" inflation, in which broadening price hikes heighten public perceptions that inflation will keep rising longer-term. If Japan's economy can withstand headwinds from an expected slump in U.S. growth, the BOJ should raise its 10-year bond yield target next year, Yamaguchi said. "One idea could be to raise the 10-year yield target and set an allowance band around it." The BOJ must also ditch a pledge to keep increasing the pace of money printing until inflation "stably exceeds" 2%, Yamaguchi said. The 2013 statement he helped draft commits the BOJ to meet its 2% inflation "at the earliest date possible."

There's a reason investors are warned not to fight the Fed, but sometimes they still need to learn the hard way. When the second most powerful central bank in the world is standing shoulder to shoulder with the Fed too, markets are bound to get a bloody nose. And this is the economy into which central banks around the world are still jacking up interest rates? Annual core CPI inflation is expected to inch up to 3.7% in November from 3.6% in October, marking a fresh 41-year high. Will there be a Santa rally, even a mini one, in the last week before Christmas?

☆ Japan govt to revise accord with BOJ to make price target flexible -Kyodo
▼ + stars: | 2022-12-17 | by ( ) www.reuters.com time to read: +1 min

TOKYO, Dec 17 (Reuters) - Japan's government is set to revise a decade-old accord with the Bank of Japan (BOJ) stating the central bank will aim to achieve its 2% inflation target "at the earliest possible time", Kyodo news agency reported on Saturday, citing government sources. In the first review of the 2013 joint agreement, the government will make the price goal more flexible, Kyodo said. Prime Minister Fumio Kishida is expected to work out details with the next BOJ governor, who will succeed Haruhiko Kuroda in April, Kyodo said. The revision could lead the BOJ to tweak its monetary easing as the side effects of its ultra-low interest rate policy - most notably the yen's sharp depreciation against other major currencies - have become more evident and pose a challenge for the Kishida administration, Kyodo said. Reporting by Yuka Obayashi; Editing by Tom HogueOur Standards: The Thomson Reuters Trust Principles.

☆ Japan Nov consumer inflation likely to hit fresh four-decade high - Reuters poll
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +1 min

TOKYO, Dec 16 (Reuters) - Japan's nationwide consumer price inflation likely hit a fresh 40-year high in November, as firms increasingly passed on high energy, food and raw material costs to households, a Reuters poll showed. November's nationwide core consumer price index (CPI), which excludes volatile fresh food prices but includes energy, will likely show a rise of 3.7% from a year earlier, according to the poll. That would be above the prior month's annual rise of 3.6% and would mark the biggest jump since the 4.0% seen in December 1981. The government will release the CPI data at 2330 GMT on Dec. 22. Reporting by Daniel Leussink; Editing by Bradley PerrettOur Standards: The Thomson Reuters Trust Principles.

☆ As Kuroda bows out, Bank of Japan's rising hawks eye end to unloved yield cap
▼ + stars: | 2022-12-16 | by ( Leika Kihara | ) www.reuters.com time to read: +12 min

PUBLIC DISCONTENTAfter a tumultuous year for the world's third-largest economy, Japan's central bank and its leadership face a critical moment. While ruling out the need to ditch the yield cap now, Takata recently said he saw positive developments in wage growth. "The BOJ must start worrying about the possibility of inflation accelerating more than expected," he told Reuters, adding the BOJ may abandon its yield cap as early as next year. Such a reaction was seen in March when the BOJ was forced to pledge unlimited bond buying to defend its yield cap from speculative market attacks. "That's why the BOJ won't provide advance signals and remove the yield cap in a single step."

☆ Take Five: Keeping the lights on
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +5 min

1/PICKING A (JAPANESE) PIVOTEven the uber-dovish Bank of Japan has not been spared from investors trying to pick central bank pivot points. France is striving to avert power cuts, and Germany is bleeding cash to keep the lights on. Thursday has meetings scheduled for Indonesia - where the central bank has just seen growth added to its mandate - as well as Egypt, which is in line for support from the International Monetary Fund. Expectations of a softer dollar as the U.S. economy slows have sparked optimism about emerging markets, which should also benefit from China easing COVID-19 restrictions. Emerging markets interest ratesCompiled by Karin Strohecker, Graphics by Sumanta Sen and Vincent Flasseur, editing by Barbara LewisOur Standards: The Thomson Reuters Trust Principles.

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