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☆ 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.

☆ 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.

☆ 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.

☆ Morning Bid: Sayonara, cheap money
▼ + stars: | 2022-12-20 | by ( ) www.reuters.com time to read: +1 min

The Bank of Japan has loosened its yield-curve control, the 10-year yield has surged toward its new ceiling and pulled the yen with it. Japanese government bond futures fell fast enough to trip a circuit breaker in Tokyo and the Nikkei lost 2.8%. But markets have already taken the move as a step toward Japan extricating itself from yield curve control and near-zero interest rates. And that would bring down the curtains for the last bastion of super-easy policy in developed markets, leaving investors to ponder a higher-for-longer world. Asian shares (.MIAPJ0000PUS) spiked lower, the yen reached a four-month high on the dollar, while the yields on the 10-year Japanese bond hovered at 0.40% - just under their new roof of 0.5%.

☆ Analysis: Global economy bets on China learning to live with COVID
▼ + stars: | 2022-12-20 | by ( Mark John | ) www.reuters.com time to read: +4 min

Bank of Japan Governor Haruhiko Kuroda cited the resurgence of virus cases in China as putting downward pressure on the global economy, while Taiwan listed the spread of COVID-19 in China as one big uncertainty facing its economy. But equally, those inflationary pressures could be cancelled out if China's woes led to softer global demand for commodities. The New York Fed's Global Supply Chain Pressure Index, launched about a year ago, already edged higher in October and November in a moderate reversal of a persistent loosening of global supply bottlenecks seen through most of 2022. Much will depend on the policy response of Chinese leaders who have pledged to support the slowing economy and to cushion the impact of rising COVID-19 infections. The World Bank now sees China's economy growing 2.7% this year and 4.3% in 2023, somewhat slower than its September forecasts of 2.8% and 4.5%, respectively.

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.

☆ 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.

☆ 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.

☆ 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.

☆ 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."

☆ 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.

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.

☆ 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.

☆ U.S. dollar gains as risk tolerance drops with hawkish central banks
▼ + stars: | 2022-12-16 | by ( ) www.cnbc.com time to read: +3 min

The dollar rose on Friday in choppy trading, extending sharp gains in the previous session as risk appetite soured, as investors grappled with the prospect that borrowing costs still have a long way to climb. New York Fed President John Williams upped the hawkish rhetoric on Friday, saying it remains possible the U.S. central bank raises interest rates more than it currently expects next year. That said, financial markets do not seem to be buying the hawkish Fed stance. The dollar index, which gauges the currency against six major peers, rose 0.2% to 104.69, after rallying more than 0.9% on Thursday. The index has surged around 9% this year as the Fed has hiked interest rates hard, sucking money back towards dollar-denominated bonds.

☆ Central banks ramp up rates again but the pace slows
▼ + stars: | 2022-12-15 | by ( ) www.reuters.com time to read: +5 min

LONDON, Dec 15 (Reuters) - Central banks in Britain, Norway, Switzerland, the euro zone and the United States have all raised interest rates this week. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%. Money markets moved after the statement to forecast UK interest rates will top out at around 4.5% in August. Markets anticipate an 80% chance of a 50 bps hike when the Riksbank meets next in February. But market players do not expect any significant change from the world's lone major central bank dove.

☆ BOJ to keep ultra-low rates, hold fire until global outlook clearer
▼ + stars: | 2022-12-15 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

Markets are rife with speculation that the BOJ will adjust its policy when Kuroda's second, five-year term ends in April. CONTENT WITH STATUS QUOAmid uncertainty over the global outlook and pace of Japanese wage rises, the BOJ is content with maintaining the status quo for now, the sources said. The BOJ expects the inflation rate to slow below its target next year because cost pressure will dissipate. Any chance of a BOJ policy adjustment will disappear if the Fed fails to tame inflation without pushing the U.S. economy into deep recession, analysts say. "But the BOJ will probably find it hard to phase out stimulus if the global economy is in bad shape," he said.

☆ Strategist explains why he thinks the Bank of Japan is committing a major policy error
▼ + stars: | 2022-12-15 | 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 EmailStrategist explains why he thinks the Bank of Japan is committing a major policy errorAmir Anvarzadeh of Asymmetric Advisors says the Bank of Japan's decision to keep interest rates low is a "major policy error" which could be corrected as soon as Governor Haruhiko Kuroda leaves his post in April.

☆ BOJ policymaker Takata rules out ending yield cap - Nikkei
▼ + stars: | 2022-12-09 | by ( ) www.reuters.com time to read: +1 min

Under YCC, the Bank of Japan (BOJ) sets a -0.1% target for short-term interest rates and caps the 10-year bond yield around 0% to achieve its 2% inflation target in a sustainable manner. Markets are simmering with speculation the BOJ could remove the 10-year yield cap to address the mounting cost of prolonged easing, such as the distortions its huge bond buying is causing in the shape of the yield curve. "Unfortunately, I don't think Japan is in that phase yet," Takata told the Nikkei in an interview published on Saturday, on whether the central bank could ditch YCC. While it wasn't easy to sustainably achieve the BOJ's 2% inflation target, there were some positive signs in corporate capital expenditure and wages, Takata was quoted as saying. Reporting by Leika Kihara; Editing by Daniel WallisOur Standards: The Thomson Reuters Trust Principles.

☆ Investors revive wagers on Bank of Japan policy change
▼ + stars: | 2022-12-08 | by ( Junko Fujita | ) www.reuters.com time to read: +4 min

TOKYO, Dec 8 (Reuters) - Global investors are short-selling Japanese bonds and driving its other market yields higher, reviving bets that the Bank of Japan will need to tweak its ultra-easy monetary policy sooner rather than later. BOJ Governor Haruhiko Kuroda has repeatedly stressed the need to persist with the bank's unique yield-curve-control policy, which makes Japan an outlier among major central banks aggressively tightening policy to combat inflation. Japan swaps vs yieldsKuroda has said policy will not change until the recent cost-push inflation is accompanied by higher growth in wages. "The central bank may tweak its YCC before March. There should be an event weight it doesn’t have at the moment," says Malcolm, while making clear UBS does not expect any policy change for at least another year.

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