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☆ Bank of Japan makes surprise policy tweak
▼ + stars: | 2022-12-20 | by ( ) www.reuters.com time to read: +8 min

ATUSHI TAKEDA, CHIEF ECONOMIST, ITOCHU ECONOMIC RESEARCH, TOKYO:"Today's move reflects the BOJ's determination not to alter its yield cure control policy. CAROL KONG, CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:"I think the move was certainly unexpected, to say the least. MOH SIONG SIM, CURRENCY STRATEGIST, BANK OF SINGAPORE:"They've widened the band, and I guess that came earlier than expected. CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE:"The timing of the policy tweak is a surprise, though we have been expecting the move to come in 2Q 2023. "The tweak may seem modest but is significant for a central bank that has held dovish for a long time.

Japan's Nikkei Stock Index (.N225) shed 2.2% after trading in positive territory earlier in the day, as stocks resumed trading following the BOJ decision. The dollar dropped 2.43% against the yen to 133.62 after the BOJ decision, hitting a four-month low. In early European futures trading, the pan-region Euro Stoxx 50 futures were down 0.89% at 3,784, German DAX futures were down 0.91% at 13,888, FTSE futures were down 0.63% at 7,321. U.S. stock futures, the S&P 500 e-minis , were down 0.52% at 3,825.5. In Asian trading, the yield on benchmark 10-year Treasury notes rose to 3.6752% compared with its U.S. close of 3.583% on Monday.

☆ Bank of Japan reviews yield-curve control policy
▼ + stars: | 2022-12-20 | by ( ) www.reuters.com time to read: +4 min

Dec 20 (Reuters) - The Bank of Japan has slightly loosened the shackles on its 10-year yield target and said it will review its yield-curve control policy, surprising financial markets and sending the yen sharply higher. However, it is only a first step and yield-curve control (YCC) remains in place, as does negative rate strategy. CAROL KONG, CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:"I think the move was certainly unexpected, to say the least. MOH SIONG SIM, CURRENCY STRATEGIST, BANK OF SINGAPORE:"They've widened the band, and I guess that came earlier than expected. CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE:"The timing of the policy tweak is a surprise, though we have been expecting the move to come in 2Q 2023.

☆ BOJ allows yields to rise more in surprise tweak to policy
▼ + stars: | 2022-12-20 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

[1/2] A Japanese flag flutters atop the Bank of Japan building under construction in Tokyo, Japan, September 21, 2017. "The BOJ decided to modify the conduct of yield curve control to improve market functioning and encourage a smoother formation of the entire yield curve, it said in a statement. As widely expected, the BOJ kept 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, at a two-day policy meeting that ended on Tuesday. But it decided to allow the 10-year bond yield to move up and down 50 basis points around the 0% target, wider than the previous 25 point band. Kuroda has repeatedly said he saw no need for the BOJ to tweak yield curve control, including taking immediate steps to address the side-effects such as the distortion it was creating in the bond market.

☆ Bank of Japan shocks global markets with bond yield shift
▼ + stars: | 2022-12-20 | by ( Elliot Smith | ) www.cnbc.com time to read: +2 min

The Bank of Japan on Tuesday shocked global markets by widening the target range for its 10-year government bond yield. Global markets were jolted overnight after the Bank of Japan unexpectedly widened its cap on 10-year Japanese government bond yields , sparking a sell-off in bonds and stocks around the world. The central bank introduced its yield curve control mechanism in September 2016, with the intention of lifting inflation towards its 2% target after a prolonged period of economic stagnation and ultra-low inflation. The YCC change prompted the Japanese yen and bond yields around the world to rise, while stocks in Asia-Pacific tanked. European government bonds also sold off, with Germany's 10-year bund yield adding almost 9 basis points to 2.2840%.

☆ 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.

☆ 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.

☆ 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.

☆ 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.

☆ 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."

☆ 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."

☆ 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.

☆ 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.

With inflation expectations already "sufficiently" high, core consumer inflation could exceed the BOJ's 2% target next fiscal year, and open scope for the central bank to abandon its 0% target for the 10-year bond yield, Hoshi said. The BOJ must start worrying about the possibility of inflation accelerating more than expected." A member of various government committees and an expert on macroeconomic policy, Hoshi spoke as a panelist at the BOJ's workshop on Nov. 25 that discussed Japan's wage dynamics. Under yield curve control (YCC), the BOJ guides short-term interest rates at -0.1% and pledges to guide the 10-year bond yield around 0%. If the BOJ were to normalise monetary policy, it will do so in several stages starting with the removal of the 10-year yield target that is distorting the shape of the yield curve, he said.

☆ BOJ's Kuroda lays out framework for future exit from easy policy
▼ + stars: | 2022-11-10 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

Kuroda brushed aside the chance of a near-term interest rate hike, stressing that the BOJ must continue to underpin a fragile economic recovery with loose monetary policy. But one major factor of debate will be the pace of increase in the BOJ's short-term policy rate, now set at -0.1%," Kuroda told parliament. "We discussed the need for the government and the BOJ to work closely together, and guide policy flexibly to structurally raise wages," said Kuroda. "It's extremely important for the BOJ to underpin the economy with ultra-loose monetary policy and ensure the necessary environment falls into place for companies to hike wages," Kuroda said. Kuroda said recent "rapid and one-sided" yen declines were undesirable as they make it difficult for firms to set business plans.

☆ BOJ's Kuroda lays out key debating points on future exit from easy policy
▼ + stars: | 2022-11-10 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

Kuroda brushed aside the chance of a near-term interest rate hike, stressing that the BOJ must continue to underpin a fragile economic recovery with loose monetary policy. But he said the BOJ can debate an exit strategy from its massive stimulus and head toward policy normalisation when achievement of its 2% inflation target, accompanied by wage increases, comes into sight. But one major factor of debate will be the pace of increase in the BOJ's short-term policy rate, now set at -0.1%," Kuroda told parliament. Kuroda said wages are likely to increase ahead as companies respond to intensifying labour shortages and recent rises in living costs, though the outlook remained highly uncertain. "It's extremely important for the BOJ to underpin the economy with ultra-loose monetary policy and ensure the necessary environment is falling into place for companies to hike wages," Kuroda said.

☆ Morning Bid: Downbeat on the downshift
▼ + stars: | 2022-11-02 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike Dolan. The recent burst of stock market optimism around the world still seems to be on shaky ground. Despite expectations the U.S. Federal Reserve will signal a much-vaunted 'downshift' in its rate rise campaign from next month - following a fourth straight 75 basis point rise on Wednesday - the incoming economic numbers won't play ball. The other slightly peculiar source of global market optimism this week has been unverified speculation over the past 48 hours that China will ease its draconian zero COVID rules in March. In Europe, markets awaited the Bank of England's latest interest rate decision on Thursday - with the bank's biggest rate rise in 33 years forecast.

☆ BOJ's Kuroda flags tweak to ultra-low interest rates as future option
▼ + stars: | 2022-11-02 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

TOKYO, Nov 2 (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Wednesday a tweak to the central bank's yield curve control (YCC) policy could become a future option, but dismissed not now. "If the achievement of our 2% inflation target comes into sight, making yield curve control more flexible could become an option," Kuroda told parliament. The remark will likely keep alive market expectations of a tweak to the central bank's ultra-low interest rates when the dovish Kuroda's second, five-year term ends in April next year. The BOJ remains an outlier among a global wave of central banks tightening monetary policy as it focuses on reflating a fragile economy with aggressive stimulus. Kuroda has repeatedly stressed the bank's resolve to keep monetary policy ultra-loose.

☆ Analysis: Wages, not yen, key to when Japan shifts away from ultra low rates
▼ + stars: | 2022-10-26 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

"It's a once-in-a-lifetime opportunity for Japan to finally see a positive wage-inflation cycle kick off," said one of the sources. Were the BOJ to tweak YCC, the most likely first step would be either to hike the 10-year yield target, or widen the implicit 50-basis-point band set around it. LOW RATES NOT FOREVERThe BOJ rules out using rate hikes to stem yen falls, as Japanese law gives the government, not the central bank, jurisdiction over exchange-rate policy. In April, dovish board member Asahi Noguchi said wages must rise by nearly 3% for the BOJ to tweak its ultra-loose policy. Yields on super-long bonds have risen to multi-year highs despite the BOJ's aggressive bond buying, casting doubt on the effectiveness of YCC.

☆ BOJ steps up, Boris bows out, Xi stays put
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +2 min

REUTERS/Tingshu WangA look at the day ahead in European and global markets from Wayne Cole. BOJ boss Kuroda has so far shown no sign of reversing course ahead of retirement next year and markets might have to wait for a new face to see the end of YCC. A, sort of, new face is a step closer to being British PM after Boris Johnson bowed out of the leadership race, leaving former FinMin Rishi Sunak in pole position. Beijing marked the rubber-stamping of Xi for a third term as leader by dumping a week of delayed data on markets, and a mixed bunch it was. Topping forecasts were GDP and industrial output, but retail sales disappointed and house prices kept falling in a warning sign for the stretched property sector.

chartchartA short position is essentially a wager that an asset's price will fall, and a long position is a bet it will rise. In aggregate, funds' short position of almost 125,000 contracts is the largest since November last year. But it failed to materially reduce the net speculative wager because funds also substantially reduced their long yen position. Ultimately, funds trimmed their net short yen position by only a few thousand contracts following the Sept. 22 intervention. The latest CFTC data shows they evidently felt confident enough to load up on short yen positions again.

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