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☆ Davos 2023 BOJ's Kuroda vows to keep ultra-loose policy
▼ + stars: | 2023-01-20 | by ( ) www.reuters.com time to read: +2 min

DAVOS, Switzerland, Jan 20 (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will continue its current "extremely accommodative" monetary policy to achieve its 2% inflation target in a stable, sustainable manner. "Our hope is that wages will start to rise, and that could make our 2% inflation target met in a stable and sustainable manner. Kuroda said the BOJ's decision to widen the band around its 10-year bond yield target was "perfectly right," brushing aside criticism that the move failed to iron out market distortions, and instead fueled speculation of additional tweaks to its yield curve control (YCC) policy. "All in all, the government's policy, coupled with the BOJ's extremely accommodative policy, have been successful in changing Japan's economic structure and growth prospects," he said. "But our 2% inflation target has not been achieved in a sustainable, stable manner," he said.

☆ BOJ may have crafted new tool for post-YCC era - analyst
▼ + stars: | 2023-01-20 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

The BOJ maintained ultra-low interest rates on Wednesday, including a 0.5% yield cap, but crafted a new policy tool to defend the ceiling and keep yields across the curve from rising too much - without having to ramp up its bond purchases. Specifically, the BOJ amended rules for an existing market operation tool, so it can pump funds extending up to 10 years in variable rates to financial institutions against collateral. Unlike its bond-buying operation, the fund-supply tool allows the central bank to push down borrowing costs with a wall of money - without having to worry about drying up bond market liquidity with its massive purchases, analysts say. "With this new tool, the BOJ may have prepared for when it ends YCC and begins normalising monetary policy," Inoue told Reuters on Thursday. "If the BOJ sees the need to set a new policy rate for shorter-maturity yields after ditching the 10-year yield target, this fund-supply operation could come in handy," he said.

SINGAPORE, Jan 20 (Reuters) - Japan's central bank appears to have scored an interim win in its long-drawn battle with bond bears. The Bank of Japan's (BOJ) policy meeting this week was, at first glance, a damp squib for excited markets. It maintained its cap on 10-year yields, defying market expectations for change, and modified a funds-supply operation such that it offers more money for longer tenors to banks. After Wednesday's decision to retain ultra-low rates, 10-year bond yields, which had been testing the BOJ's 0.5% cap for a week, settled below 0.4%, suggesting many speculators were closing positions. "Most people are concerned about market liquidity in the bond market," a senior trader at a global bank in Asia told Reuters.

☆ Explainer: How the BOJ's new yield-controlling tool works
▼ + stars: | 2023-01-20 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

Specifically, the BOJ amended rules for an existing market operation tool, so it can pump funds extending up to 10 years in variable rates to financial institutions against collateral. While the new tool could keep bond bears at bay, there is uncertainty on how effective it would be in keeping long-term interest rates from rising. Defying bets of a policy tweak, the BOJ kept ultra-low interest rates and the 0.5% yield cap on Wednesday. It is unusual for central banks to use funds-supplying operation, typically focused on guiding short-term interest rates, to influence long-term rates. By tweaking the tool, the BOJ can enhance its control over interest rate moves and risks stifling market-driven asset pricing.

☆ Dollar rises on safe haven bids; yen regains footing
▼ + stars: | 2023-01-19 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

FILE PHOTO: A U.S. hundred dollar bill and Japanese 10,000 yen notes are seen in this photo illustration in Tokyo, February 28, 2013. The fresh wave of risk aversion - compounded by news of job cuts by tech giants Microsoft and Amazon - also kept the dollar in bid. The euro was last 0.39% lower at 138.58 yen, while sterling fell 0.23% to 158.27 yen, as markets continued to test the resolve of the BOJ’s ultra-dovish stance. “While there’s still high expectations for a policy shift ... I think that will keep the yen pretty elevated in the near term.”Elsewhere, the kiwi fell 0.31% to $0.6425.

☆ Analysis: BOJ bullishness on wages suggests days of super-low rates are numbered
▼ + stars: | 2023-01-19 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

Kuroda likely put YCC on life support so his successor can strategise an orderly exit, said former BOJ official Nobuyasu Atago. He said the bank could raise the 0.5% yield cap to as high as 1% around mid-year and ditch negative rates by year's end. The parent of casual clothing giant Uniqlo says it will raise wages as much as 40%. "If the BOJ ends negative rates, that would widen the spread between deposit and lending rates so would definitely be positive for us," he said. With YCC creaking under market pressure, the BOJ may not be able to wait too long.

☆ U.S. dollar advances vs major currencies as risk appetite fades
▼ + stars: | 2023-01-18 | by ( Gertrude Chavez-Dreyfuss | ) www.reuters.com time to read: +5 min

The earlier sell-off in the dollar came after the Bank of Japan maintained ultra-low interest rates. In afternoon trading, the U.S. currency rose against the commodity-linked currencies such as the Australian, New Zealand, and Canadian dollars, which sensitive to risk appetite. The Australian dollar fell 0.7% to US$0.6936, after hitting its highest since August last year. In Japan, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The dollar rose as much as 2.7% to 131.58 yen before gains were pared.

"This step will allow us to push down longer-term interest rates, without directly affecting supply and demand of the cash Japanese government bond (JGB) market," Kuroda told a news conference. Following its two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. Reuters Graphics Reuters GraphicsThe central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. "By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won't make big monetary policy changes under Kuroda." Market attention is already shifting toward monetary policy under Kuroda's successor, who will need to steer an orderly exit from decades of ultra-low rates.

☆ Japan yields tumble to well below policy cap as BOJ stands pat
▼ + stars: | 2023-01-18 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

[1/2] A Japan Yen note is seen in this illustration photo taken June 1, 2017. The yield was at 0.51% prior to the Bank of Japan decision. "If they had expanded the band again or terminated YCC, yields would rise, which would be a de facto rate hike for a second consecutive meeting," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. The BOJ also made use of a newly announced policy tool immediately, offering five-year loans to financial institutions to enhance liquidity, and showing its resolve to keep yields low. At the post-meeting press conference, Kuroda defended the change, reiterating that widening the yield band has made YCC "fully sustainable".

☆ Yen plunges as BOJ sticks to ultra-easy policy
▼ + stars: | 2023-01-18 | by ( Ankur Banerjee | ) www.reuters.com time to read: +2 min

Since then, speculation had swirled that the BOJ could tweak its yield curve control (YCC) policy further or even scrap it. At a two-day policy meeting, the BOJ kept intact its YCC targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The Australian dollar gained 2.2% and Singapore dollar rose 1.9%. The 10-year yield has repeatedly breached the ceiling in the past four sessions. The Australian dollar rose mostly flat, while the kiwi rose 0.30% at $0.645.

☆ Japanese yen tumbles, bonds rally after BOJ keeps policy ultra easy
▼ + stars: | 2023-01-18 | by ( Stella Qiu | ) www.reuters.com time to read: +5 min

The bank, however, maintained ultra-low interest rates, including its 0.5% cap for the 10-year bond yield. The dollar also gained 2.5% against the Japanese yen to 131.4 yen, in its biggest percentage daily rise since March 2020. In a Reuters poll, 97% of economists expected the BOJ to maintain its ultra-easy policy at the meeting. A survey of global fund managers by BofA Securities out on Tuesday showed that expectations of further appreciation in the Japanese yen in January were the highest in 16 years. The dollar index , which measures the safe-haven dollar against six peers, rose 0.4% at 102.84.

The surprise decision sent the yen skidding against other currencies and bond yields tumbling the most in decades, as investors unwound bets they made anticipating the central bank would overhaul its yield control policy. At a two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. Underscoring its resolve to keep defending the cap, the BOJ beefed up a key market operation tool to more effectively curb rises in long-term interest rates. "By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won't make big monetary policy changes under Kuroda."

☆ Morning Bid: BOJ goes for broke
▼ + stars: | 2023-01-18 | by ( Wayne Cole | ) www.reuters.com time to read: +3 min

SYDNEY, Jan 18 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. Global bond markets breathed a sigh of relief and U.S. 10-year yields eased 8 basis points to 3.48%. The BOJ will continue to buy bonds in whatever amount necessary to maintain its target for 10-year JGB yields at zero. It was unclear how meaningful this change would be, but the BOJ's defiant stance did see 10-year JGB yields backtrack to 0.36% from an early high of 0.51%. Analysts still suspect the BOJ will again have to buy a record amount of JGBs this month to maintain the ceiling.

☆ Japan yields tumble below policy cap after BOJ keeps status quo
▼ + stars: | 2023-01-18 | by ( Kevin Buckland | ) www.reuters.com time to read: +2 min

The 10-year yield was last down 10.5 basis points at 0.395%, which would mark the biggest one-day decline in seven years. It was at 0.51% prior to the BOJ decision. Ten-year JGB futures jumped when they resumed trading following the midday break, trading up as much as 1.81 points to 146.65, the highest since Dec. 20. "If they had expanded the band again or terminated YCC, yields would rise, which would be a de facto rate hike," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. The 10-year yield has repeatedly breached the BOJ's ceiling, only to close back at the 0.5% limit on each day.

☆ BOJ crafts new weapon to defend yield control policy
▼ + stars: | 2023-01-18 | by ( ) www.reuters.com time to read: 1 min

TOKYO, Jan 18 (Reuters) - The Bank of Japan on Wednesday amended rules for a fund-supply market operation to use it as a new tool to prevent long-term interest rates from rising too much, in a show of its resolve to maintain yield curve control (YCC) for the time being. Under the amended rules, the central bank can offer funds of up to 10 years against collateral to financial institutions for both fixed- and variable-rate loans. After announcing the new rules, the BOJ said it will offer five-year loans under the fund-supply operation with a duration of between Jan. 24, 2023 and Jan. 24, 2028. Reporting by Leika Kihara; Editing by Christopher CushingOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of Japan keeps yield control policy unchanged
▼ + stars: | 2023-01-18 | by ( ) www.reuters.com time to read: +7 min

MARKET REACTION:The Japanese stock market cheered the BOJ's decision with the Nikkei share average (.N225) jumping more than 2% after the midday break. Therefore, among equities, we think Japanese financials sector will have a rerating of valuations over the next 3-6 months." That could escalate when the new governor of the bank will be announced and towards the policy meeting in March." MOH SIONG SIM, CURRENCY STRATEGIST, BANK OF SINGAPORE, SINGAPORE"The can has been kicked down the road and the attention will shift to the next meeting. CHARU CHANANA, MARKET STRATEGIST, SAXO MARKETS, SINGAPORE:"I think the speculations will still continue.

[1/2] A man walks at the headquarters of Bank of Japan in Tokyo, Japan, January 18, 2023. At a two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. The decision to keep settings unchanged sent the dollar surging nearly 2% against the yen, its biggest one-day percentage jump since June 17. It also revised up the inflation forecast for fiscal 2024 to 1.8%, from 1.6% seen three months ago.

☆ BOJ keeps yield control policy unchanged
▼ + stars: | 2023-01-18 | by ( ) www.reuters.com time to read: +1 min

TOKYO, Jan 18 (Reuters) - The Bank of Japan on Wednesday maintained ultra-low interest rates, including its 0.5% cap for the 10-year bond yield, defying market expectations it would phase out its massive stimulus programme in the wake of rising inflationary pressure. At a two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. The decision follows the BOJ's surprise move last month to double the yield band, a tweak that analysts say has failed to correct market distortions caused by its heavy bond buying. Reporting by Leika Kihara, Tetsushi Kajimoto, Kantaro Komiya and Daniel Leussink; Editing by Sam HolmesOur Standards: The Thomson Reuters Trust Principles.

☆ Asian shares tentative, Japan yields close to policy cap ahead of BOJ meeting
▼ + stars: | 2023-01-18 | by ( Stella Qiu | ) www.reuters.com time to read: +4 min

SummarySummary Companies Asian shares mixed; Nikkei up 0.6%Markets eye change to yield policy from BOJ meeting on WedJapan yields retreat from policy cap; Yen eases from 7-mth highOil extend gains on China optimismSYDNEY, Jan 18 (Reuters) - Asian shares were mixed on Wednesday while Japanese yields hugged a policy cap, with markets anxiously awaiting a pivotal Bank of Japan (BOJ) meeting that could see the world's third largest economy shift away from decades of ultra-low interest rates. In early Wednesday trade, however, the 10-year yield fell to 0.485% before returning to 0.5%. China's blue chips (.CSI300) rose 0.2%, while Hong Kong's Hang Seng Index (.HSI) was 0.2% lower. It has been undermined by falling U.S. bond yields as markets wager the Federal Reserve can be less aggressive in hiking rates. The yield on benchmark 10-year Treasury notes rose slightly to 3.5402% from its U.S. close of 3.535%, partly in anticipation of the BOJ tweaking its policy.

☆ Key moments in BOJ's monetary policy
▼ + stars: | 2023-01-18 | by ( ) www.reuters.com time to read: +3 min

1999February - BOJ introduces zero interest rate policy. 2000August - BOJ raises short-term target to 0.25%, a move criticised as premature as Japan suffers a domestic banking crisis. 2001March - BOJ adopts quantitative easing (QE), shifts policy target from interest rates to pace of money printing. 2016January - BOJ adds negative interest rate policy, and applies a 0.1% charge to a small pool of excess reserves financial institutions park with the central bank. July - BOJ eases monetary policy, ramps up ETF buyingSeptember - BOJ adopts yield curve control (YCC), shifts policy target to interest rates from pace of money printing and introduces 10-year bond yield target of around 0%.

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

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

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

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

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

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

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

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

☆ Japan yields stay above policy cap as BOJ sticks to status quo
▼ + stars: | 2023-01-18 | by ( Kevin Buckland | ) www.reuters.com time to read: +2 min

TOKYO, Jan 18 (Reuters) - Japanese government bond yields remained above the central bank's 0.5% policy ceiling on Wednesday, after the Bank of Japan unanimously decided to keep its yield curve controls in place. The benchmark yield was up 1 basis point at 0.51% as of 0250 GMT. In a relatively volatile session for cash bonds, the yield had started out flat and then eased as much as 1.5 basis points at one point to 0.485%. The 10-year yield has repeatedly breached the BOJ's ceiling, only to close back at the 0.5% limit on each day. Ten-year JGB futures were in the midday break at the time of the policy decision.

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