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☆ Factbox: BOJ's possible next step as market attacks yield policy
▼ + stars: | 2023-01-16 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

STAND PATThe BOJ's decision last month to widen the band around its 10-year yield target has failed to remove market distortions caused by its huge bond buying, instead prompting the market to test the 0.5% upside of the range. MORE TWEAKSBond sellers broke the BOJ's 0.5% cap on Friday, less than a month after the policy tweak, forcing emergency buying from the central bank to bring the yield back down. Or it could widen the band around its 10-year yield target. ABANDON, RAISE YIELD TARGETThere is a slim chance the BOJ could raise the 10-year yield target or abandon YCC altogether. Any such move would likely be accompanied by, or come well after, the end of the 10-year yield target.

☆ Bank of Japan could announce major policy shift this week as bond yields top limit again
▼ + stars: | 2023-01-16 | by ( Jihye Lee | ) www.cnbc.com time to read: +4 min

This picture taken on October 27, 2022 shows pedestrians walking in front of the Bank of Japan (BoJ) headquarters in Tokyo. The move would come less than a month after the Bank of Japan caught markets off guard by widening its tolerance range for 10-year Japanese government bond yields. Indeed, Nikkei reported Monday that the Bank of Japan purchased JGBs worth more than 2 trillion yen ($15.6 billion) after the nation's 10-year bond yield curve topped 0.5% for two consecutive sessions. While the central bank leaving interest rates unchanged would be positive for Japanese stocks, BofA said a removal of its yield curve control policy could lead to sharp declines. HSBC, meanwhile, expects the central bank to announce further widening of the yield curve control tolerance band instead of abolishing the policy altogether.

☆ 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."

☆ Economists say BOJ's Amamiya is top governor candidate, tightening this week unlikely
▼ + stars: | 2023-01-16 | by ( Kantaro Komiya | ) www.reuters.com time to read: +5 min

Of the 24 economists who replied to the Jan 5-12 poll, 16, or 67%, chose Amamiya as the most likely candidate to become the next BOJ governor. Four economists in the poll, or 17%, chose Nakaso, who is seen less dovish than Amamiya, as the most likely candidate. In a September poll that asked the same question, Amamiya and Nakaso received 61% and 33% of economists' votes, respectively. Five analysts expected the unwinding of easing to start in April, at the first BOJ meeting under the new governor. Elsewhere in the poll, 83% of economists said Japanese nominal wages were unlikely to outpace rising consumer prices in 2023.

☆ Japan’s 10-Year Government Bond Yield Breaches New Cap
▼ + stars: | 2023-01-13 | by ( Megumi Fujikawa | ) www.wsj.com time to read: 1 min

Bank of Japan Gov. Haruhiko Kuroda has said that the new cap doesn’t represent the start of a monetary-tightening cycle, but many central bank watchers think otherwise. TOKYO—The yield on benchmark 10-year Japanese government bonds breached the 0.5% cap set by the Bank of Japan less than a month ago, as pressure grows on the central bank to tighten policy. Strong inflation data this week have sparked speculation among investors that the BOJ will join the Federal Reserve and other central banks in unwinding its easing program by lifting the cap again, or even scrapping its yield-curve control policy altogether.

TOKYO, Jan 13 (Reuters) - Yields on Japan's benchmark 10-year government bonds breached the central bank's new ceiling on Friday in the market's most direct challenge yet to decades of uber-easy monetary policy. The central bank already holds 80% to 90% of some bond lines. REMEMBER THE RBAThere is talk in the markets that the central bank could shorten its yield target to three- and five-year bonds, but history abroad suggests the strain will remain. With the local economy recovering faster than expected and inflation accelerating, the RBA realised its pledge to keep three-year yields at 0.1% out to 2024 was no longer credible. So it abruptly dropped the whole thing and three-year yields spiked to 0.48%, an episode the RBA itself conceded caused "reputational damage" that would not be repeated.

☆ Morning Bid: RIP YCC?
▼ + stars: | 2023-01-12 | by ( Wayne Cole | ) www.reuters.com time to read: +3 min

SYDNEY, Jan 12 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. This, presumably, refers to the fact that 10-year yields have been stuck at the new YCC ceiling of 0.5% for four sessions, even while the BOJ has been busy buying bonds in bulk to get them down. Then again, the market had thought the same last month when the central bank wrongfooted everyone by widening its YCC band. Whatever the decision, time is ticking for YCC and maybe even negative rates in Japan. As for U.S. CPI, the market is clearly priced for a dovish outcome, so there's some risk of disappointment.

☆ Asia stocks hit 7-month high on China and CPI bets
▼ + stars: | 2023-01-12 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

Following gains for Wall Street indexes overnight, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.5% and touched an almost seven-month high. Bonds were bought around the world overnight and the U.S. dollar wavered, to touch a seven-month low at $1.0776 per euro . "(It) is the CPI number that could help settle the debate for the February meeting," said NatWest Markets' U.S. rates strategist Jan Nevruzi. "We expect a below consensus CPI print, which if it materialises, could push this rally even further." Foreign exchange markets were elsewhere holding their breath ahead of CPI data while China's reopening kept a bid under Asia's currencies.

☆ Uniqlo goes out on a limb in salary hike
▼ + stars: | 2023-01-12 | by ( ) www.reuters.com time to read: +2 min

HONG KONG, Jan 12 (Reuters Breakingviews) - Fast Retailing (9983.T), owner of the Uniqlo clothing chain, announced it would hike wages by up to 40% for some roles on Wednesday. The bigger question, though, is how much of an outlier Fast Retailing will be. Although Japan’s labour market is tight, weak growth and rising prices have caused real wages to contract for eight consecutive months through November. Fast Retailing, set to announce earnings today, was a market outperformer last year and is preparing a 3-1 stock split. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ IMF's Georgieva says Japan not facing increased inflationary pressures
▼ + stars: | 2023-01-12 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, Jan 12 (Reuters) - International Monetary Fund Managing Director Kristalina Georgieva on Thursday said the Bank of Japan was conducting an appropriate review of its monetary policy stance, but should keep policy accommodative because the country faces low inflationary pressures. Georgieva told reporters that an adjustment to the central bank's debt yield curve control regime was not driven by an increase in inflation, which remains very close to the bank's 2% target. The pressure from labor on increases in labor compensation has not led to any dramatic change. At the time, BOJ Governor Haruhiko Kuroda said the move was aimed at prompting increased bond purchases and was a fine-tuning of the central bank's ultra-loose monetary policy rather than a withdrawal of stimulus. Georgieva said it was appropriate for the central bank to take a cautious approach to its monetary policy.

☆ BOJ's 2% inflation target can be tweaked to 'range', deputy governor candidate says
▼ + stars: | 2023-01-11 | by ( Kantaro Komiya | ) www.reuters.com time to read: +2 min

TOKYO, Jan 11 (Reuters) - The Bank of Japan's (BOJ) 2% inflation target can be modified into a "range" to sustain monetary policy flexibility amid possibly higher inflation compared to pre-COVID times, former board member Sayuri Shirai said on Wednesday. Shirai, widely seen as a candidate to become deputy governor at the central bank this spring, also said there should be a review of Japan's monetary policy over the past 10 years. "Given the chance inflation may stay elevated compared to pre-pandemic, we must be careful about abolishing the 2% inflation target and I think making it a range is one possibility." The BOJ, long preoccupied with reviving price growth to avert a risk of deflation, has been an outlier among central banks this year. The new BOJ leadership after the incumbent governor Haruhiko Kuroda's term ends in April should conduct a policy review, Shirai said, as she had the impression the central bank's communication with markets had become slightly "complex".

"There are plenty of other people who can take measures to combat climate change and I worry that people, in their great enthusiasm for doing good, are actually putting at risk central bank independence," King said. They were in a minority in a conference packed with central bankers who had long accepted they had some duty towards the environment and, in many cases, were already taking some steps. "It would be misleading to use tighter financing conditions as a scapegoat for further delays in the green transition," Schnabel said. "By saying we have a role to play in helping to finance the green transition... we are increasing this misunderstanding of what our role is," said Wunsch, Belgium's central bank governor. Singapore's Ravi Menon, meanwhile, said central bankers should do much more to help the economy reduce its emissions than just focussing on the risks.

☆ Dollar sluggish as Fed rate hike fears ebb; China reopening boosts optimism
▼ + stars: | 2023-01-10 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

The euro was last 0.07% higher at $1.0739, holding near the previous session's seven-month peak of $1.07605 that came on the back of the dollar's decline. Sterling slid 0.08% to $1.21705, after similarly hitting a three-week top of $1.2209 on Monday and ending the session 0.73% higher. Against a basket of currencies, the U.S. dollar index fell 0.03% to 103.14, after tumbling 0.7% and touching a seven-month low of 102.93 in the previous session. The offshore yuan last bought 6.7755 per dollar, after hitting a near five-month top of 6.7590 earlier in the session. Brazil's real snapped its three-day winning run in the previous session and last stood at 5.2546 per dollar after supporters of former President Jair Bolsonaro stormed the capital.

☆ Dollar languishes as Fed rate hike fears recede; China reopening boosts optimism
▼ + stars: | 2023-01-10 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

The dollar's decline pushed the euro to a seven-month peak of $1.07605 in the previous session. Sterling slipped 0.03% to $1.2177, after similarly hitting a three-week top of $1.2209 on Monday and ending the session 0.73% higher. Against a basket of currencies, the U.S. dollar index edged 0.04% higher to 103.21, after tumbling 0.7% and touching a seven-month low of 102.93 in the previous session. The offshore yuan last bought 6.7757 per dollar, and was edging towards the previous session's near five-month top of 6.7665 per dollar. "Hedge funds managers have turned slightly bearish USD following the full reopening in China," said Tareck Horchani, head of head of prime brokerage dealing at Maybank Securities.

☆ Morning bid: Obstacle course ahead
▼ + stars: | 2023-01-10 | by ( ) www.reuters.com time to read: +6 min

San Francisco Fed President Mary Daly and Atlanta Fed chief Raphael Bostic said they expect Fed rates - now at 4.25% to 4.5% - will need to rise to a 5% to 5.25% range to sap inflation. The other big market obstacle of the week is the onset of the U.S. corporate earnings season. Four American banking giants - JPMorgan (JPM.N), Bank of America (BAC.N), Citigroup (C.N) and Wells Fargo (WFC.N) - report earnings on Friday. Diaried events and data releases that may provide direction to U.S. and world markets later on Tuesday:* U.S. Dec NFIB small business survey. * U.S. Federal Reserve Chair Jerome Powell, Bank of Japan governor Haruhiko Kuroda, Bank of England Governor Andrew Bailey, Bank of Canada governor Tiff Macklem and European Central Bank board member Isabel Schnabel all speak at Swedish central bank event.

The increase, which was the fastest pace in four decades, will likely underpin market expectations the Bank of Japan (BOJ) may phase out its massive stimulus by tweaking its yield control policy. The rise in the Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel, exceeded a median market forecast of 3.8% and a 3.6% gain seen in November, government data showed on Tuesday. The last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year before. The rise in Tokyo CPI heightens the chance nationwide consumer inflation likely stayed above the BOJ's 2% target in December. But Japan's long-term interest rates have crept up since the BOJ stunned markets last month by widening the band around its 10-year bond yield target, a move investors saw as a prelude to a future rate hike.

☆ Japan Kishida vows to debate govt, BOJ roles with new central bank head
▼ + stars: | 2023-01-08 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

The remark heightens the chance the government may revise its a decade-long blueprint with the central bank that focuses on beating deflation, a move that would lay the groundwork for an exit from the BOJ's ultra-loose monetary policy. "Under the new BOJ governor, we must discuss the relationship between the government and the BOJ," said Kishida, who has authority to choose the central bank head. Markets are rife with speculation the BOJ could move further to phase out Kuroda's massive stimulus by tweaking its yield control policy under a new central bank governor. "In guiding monetary policy, policymakers must have a view on the outlook for the economy. There needs to be careful communication and dialogue with markets," Kishida said, when asked whether the BOJ needs to tweak it ultra-loose policy.

"Price rises are broadening more than initially expected, a trend that could continue if wages rise enough," one of the sources said. The BOJ has traditionally used core consumer inflation, which excludes the effect of fresh food but includes energy costs, as a key gauge in producing forecasts and guiding policy. In fresh quarterly projections due this month, the BOJ would probably raise its core-core inflation forecasts for the current fiscal year ending in March and fiscal 2023, they said. The BOJ will issue the quarterly forecasts after a two-day policy meeting that ends on Jan. 18. With public discontent over rising prices hurting approval ratings, Prime Minister Fumio Kishida on Wednesday urged firms to offer wage hikes exceeding the rate of inflation.

☆ BOJ's Kuroda aims to keep policy loose to meet price, wage growth goals
▼ + stars: | 2023-01-04 | by ( Yoshifumi Takemoto | ) www.reuters.com time to read: +1 min

TOKYO, Jan 4 (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Wednesday the central bank would maintain its loose monetary policy in order to sustain inflation at its 2% target along with wage growth. Kuroda's comments at a New Year gathering of the Japanese bankers' association counter lingering market speculation the BOJ may join the world's major central banks in tightening money supply to fight decade-high inflation. The world's third-largest economy would grow firmly and stably this year backed by accommodative monetary conditions although uncertainties such as inflation and the COVID-19 pandemic remain, Kuroda said. Adding to the uncertainty, the yen rebounded sharply on speculation the BOJ may start to turn away from its ultra-loose monetary policy after it widened the yield cap range on 10-year Japanese government bonds (JGBs) last month. Reporting by Yoshifumi Takemoto; Writing by Tetsushi Kajimoto; Editing by Jacqueline WongOur Standards: The Thomson Reuters Trust Principles.

☆ BOJ considering raising inflation forecasts to near 2% target -Nikkei
▼ + stars: | 2022-12-31 | by ( Reuters Staff | ) www.reuters.com time to read: +2 min

FILE PHOTO: A man walks past Bank of Japan's headquarters in Tokyo, Japan, June 17, 2022. REUTERS/Kim Kyung-Hoon/(Reuters) -The Bank of Japan (BOJ) is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024, Nikkei reported on Saturday. Upgrades to the BOJ’s inflation forecast would further fuel such speculation as Governor Haruhiko Kuroda has said the central bank could discuss the exit if achievement of its 2% inflation target in tandem with wage hikes comes into sight. The previous forecasts released in October were around 2.9%, 1.6% and 1.6%, respectively. The BOJ will release the latest quarterly growth and price outlook after its next policy meeting on Jan. 17-18.

☆ Bank of Japan may raise inflation forecasts to near 2% target, report says
▼ + stars: | 2022-12-31 | by ( ) www.cnbc.com time to read: +1 min

People walk the popular shopping area of Ueno in Tokyo on December 23, 2022. The Bank of Japan (BOJ) is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024, Nikkei reported on Saturday. Upgrades to the BOJ's inflation forecast would further fuel such speculation as Governor Haruhiko Kuroda has said the central bank could discuss the exit if achievement of its 2% inflation target in tandem with wage hikes comes into sight. The previous forecasts released in October were around 2.9%, 1.6% and 1.6%, respectively. Japan's core consumer prices excluding fresh food items rose 3.7% in November, the highest since 1981, government data showed last week.

☆ Ex-BOJ deputy Yamaguchi emerging as next c.bank head contender -Sankei
▼ + stars: | 2022-12-29 | by ( ) www.reuters.com time to read: +2 min

TOKYO, Dec 29 (Reuters) - Former Bank of Japan Deputy Governor Hirohide Yamaguchi, a vocal critic of Governor Haruhiko Kuroda's stimulus programme, is emerging as a strong candidate to become next head of the central bank, the Sankei newspaper reported on Thursday. Yamaguchi had been considered a less likely candidate compared with deputy governor Masayoshi Amamiya and former deputy Hiroshi Nakaso. But Yamaguchi is attracting more attention as a strong candidate as Kishida's administration distances itself from Abenomics, the Sankei said, adding that Kishida's choice of new BOJ governor will become clear as early as next month. A career central banker with deep experience in monetary policy drafting, Yamaguchi served as deputy governor for five years until 2013. Since retiring from the BOJ, Yamaguchi has warned of the rising cost of prolonged easing and criticised Kuroda's stimulus as relying too much on the view that central banks can influence public perception with monetary policy.

☆ Academic close to Japan's Kuroda says BOJ moving towards policy normalisation
▼ + stars: | 2022-12-28 | by ( ) www.reuters.com time to read: +2 min

Kuroda said then that the move was not a prelude to an exit from ultra-loose policy, because recent price rises meant Japan's inflation-adjusted, real interest rate had been declining. Japan's annual consumer inflation rate hit 2.8% in November even when excluding the effect of higher energy and food prices. "That would be an ideal initial condition for the BOJ to start hitting its inflation target on a more sustainable basis," Ito said. Ito and Kuroda, who have been close since working together at Japan's finance ministry in 1999-2001, lobbied hard for the BOJ to adopt a 2% inflation target to end deflation. The BOJ did so in early 2013 and deployed a massive stimulus programme when Kuroda became governor months later.

☆ Japan to make raising wages a top priority, says senior govt official
▼ + stars: | 2022-12-28 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

"The biggest challenge for Japan's economy is a lack of wage growth. Unless wages rise, consumption won't pick up and companies won't increase investment," Kihara said, speaking during a television programme. While companies are responsible for deciding how much they hike pay, the government can help achieve higher wages through tax incentives, Kihara said. "The government will increase its focus on achieving wage growth. Japan's consumer inflation hit a four-decade high of 3.7% in November, well above the BOJ's target, hitting households who have yet to see wages rise enough to make up for the spike in prices of consumers goods.

☆ Asian shares slip as investors gauge China reopening policy
▼ + stars: | 2022-12-28 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

SINGAPORE, Dec 28 (Reuters) - Asian equities were subdued on Wednesday, while the dollar held firm, with investors looking for direction after China took further steps towards reopening its COVID-battered economy. The yield on 10-year Treasury notes was down 0.9 basis points at 3.849%, hovering around the five-week high of 3.862% it touched in the previous session. The yield on the 30-year Treasury bond was down 2.3 basis points at 3.920%, while the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1.9 basis points at 4.349%. "The spring salary negotiation next year is the most important to watch for further meaningful policy change for the Bank of Japan." The dollar index , which measures the safe-haven greenback against six major currencies, rose 0.077%.

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