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TOKYO, Dec 27 (Reuters) - The Bank of Japan (BOJ) has modified its stimulus measures to ease the transition away from an unconventional monetary policy when Governor Haruhiko Kuroda retires in April, former top currency diplomat Takehiko Nakao told Reuters in an interview. "The BOJ has not succeeded so much in raising inflation expectations and bringing down real interest rates while side-effects became larger. "The yen was too strong back then, but now the yen is clearly too weak," Nakao said, declining to specify preferred levels under current circumstances. Nakao said Japan's waning economic power and its excessively expansionist policy are weighing on the yen and making Japanese assets vulnerable to takeovers by overseas investors. "It is helpful that raising interest rates lead to some strengthening of the yen."

☆ Dollar retreats as risk appetite improves; Australia, NZ currencies rise
▼ + stars: | 2022-12-27 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

China will stop requiring inbound travellers to go into quarantine on arrival starting Jan. 8, the National Health Commission said on Monday, even as COVID cases spike. At the same time, Beijing downgraded the regulations for managing COVID cases to the less strict Category B from the top-level Category A. "There seems to be no let-up in the pace of relaxing COVID restrictions despite the surge in COVID cases in the mainland," said Christopher Wong, a currency strategist at OCBC. "It's worth remembering that the dollar rose in each of the past four years in January. "While ... (the) policy tweak has added uncertainty to the BOJ outlook, we continue to lean toward BOJ policymakers making no further policy adjustments through the end of 2023," said analysts at Wells Fargo.

☆ Dollar flat as investors digest China's loosening of COVID rules
▼ + stars: | 2022-12-27 | by ( ) www.cnbc.com time to read: +3 min

The dollar was flat on Tuesday after China said it would scrap its COVID-19 quarantine rule for inbound travelers - a major step in reopening its borders, even as COVID cases spike. At the same time, Beijing downgraded regulations for managing COVID cases to the lighter Category B from the top-level Category A. "There seems to be no let-up in the pace of relaxing COVID restrictions despite the surge in COVID cases in the mainland." Elsewhere, the euro rose 0.1% against the dollar to $1.0640. With UK markets closed for a public holiday, trading in sterling was muted, leaving the pound down against the dollar at around $1.2031.

☆ BOJ Kuroda dismisses near-term chance of exiting easy policy
▼ + stars: | 2022-12-26 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

Kuroda said the BOJ's decision last week to widen the allowance band around its yield target was aimed at enhancing the effect of its ultra-easy policy, rather than a first step toward withdrawing its massive stimulus programme. "Labour market conditions in Japan are projected to tighten further, and firms' price- and wage-setting behaviour is also likely to change," Kuroda said. The BOJ shocked markets last week with a surprise widening of the band around its 10-year yield target. The outcome of next year's spring wage negotiations between big companies and unions will also be key to the outlook for wage growth, he said. Speaking at the same meeting, Prime Minister Fumio Kishida called for business leaders' help in achieving wage growth high enough to compensate households for the rising cost of living.

☆ Bank of Japan Governor Haruhiko Kuroda dismisses near-term chance of exiting easy policy
▼ + stars: | 2022-12-26 | by ( ) www.cnbc.com time to read: +2 min

Haruhiko Kuroda, governor of the Bank of Japan, speaks during a news conference at the central bank's headquarters in Tokyo on Dec. 20, 2022. Yuya Yamamoto | Jiji Press | Bloomberg | Getty ImagesBank of Japan Governor Haruhiko Kuroda on Monday brushed aside the chance of a near-term exit from ultra-loose monetary policy but voiced hope that intensifying labor shortages will prod firms to raise wages. "Labor market conditions in Japan are projected to tighten further, and firms' price- and wage-setting behavior is also likely to change," Kuroda said. "In this sense, Japan is approaching a critical juncture in breaking out of a prolonged period of low inflation and low growth," he said. The BOJ shocked markets last week with a surprise widening of the band around its 10-year yield target.

☆ Japan’s Yield Curve Control Is a Tool Worth Keeping
▼ + stars: | 2022-12-22 | by ( Jon Sindreu | ) www.wsj.com time to read: 1 min

Like a heavy power drill, the Bank of Japan’s policy of capping bond yields seems to be difficult to use without cracking the wall. Unlike many of the tools tested by central banks since 2008, though, it may be worth keeping in the box. Haruhiko Kuroda has so far stood apart from other central bankers in refusing to unwind extra-loose monetary policy. Under his “yield curve control,” or YCC, the 10-year Japanese government-debt yield remains pegged at 0%. Yields have since jumped close to the new ceiling.

☆ Japan's consumer inflation hits fresh 40-year high, eyes on BOJ policy
▼ + stars: | 2022-12-22 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

Japan's core consumer price index (CPI), which excludes volatile fresh food but includes energy costs, rose 3.7% in November from a year earlier, data showed on Friday, matching market forecasts and perking up from a 3.6% gain in October. Reuters GraphicsAside from utility bills, prices rose for a broad range of goods from fried chicken, smartphones to air conditioners, in a sign of mounting inflationary pressure, the data showed. But an index stripping away such one-off factors may remain elevated and keep pressure on the BOJ to remain vigilant to the chance of a demand-driven rise in inflation. "We'll likely see a rush in price hikes next year that could be more intense than this year," as companies face rising labour and distribution costs, Teikoku Data Bank said. The CPI data will likely be among key factors the BOJ will scrutinise when it produces fresh quarterly inflation forecasts at a two-day policy meeting ending on Jan. 18.

☆ Japan’s consumer inflation hits fresh 40-year high
▼ + stars: | 2022-12-22 | by ( ) edition.cnn.com time to read: +4 min

Japan’s core consumer inflation hit a fresh four-decade high as companies continued to pass on rising costs to households, data showed, a sign price hikes were broadening and could keep the central bank under pressure to whittle down massive stimulus. Japan’s core consumer price index (CPI), which excludes volatile fresh food but includes energy costs, rose 3.7% in November from a year earlier, data showed Friday, matching market forecasts and perking up from a 3.6% gain in October. “We’ll likely see a rush in price hikes next year that could be more intense than this year,” as companies face rising labor and distribution costs, Teikoku Data Bank said. We can’t rule out the chance of a big overshoot in inflation,” one member was quoted as saying in the October minutes. The CPI data will likely be among key factors the BOJ will scrutinize when it produces fresh quarterly inflation forecasts at a two-day policy meeting ending on January 18.

☆ Analysis: Kuroda's abrupt policy tweak opens door for bigger shift next year
▼ + stars: | 2022-12-21 | by ( Leika Kihara | ) www.reuters.com time to read: +6 min

Waiting until next year would have forced the BOJ to combat intensifying market speculation of a near-term policy shift, or act when a deep U.S. recession could hit Japan's economy, they say. "When uncertainty is so high over the outlook for U.S. monetary policy, it probably wants to have a free hand on when next to act." POLITICS KEY TRIGGERThe abrupt timing of Tuesday's move also reflects growing political pressure for the BOJ to shift away from a policy narrowly focused on its 2% inflation target, the sources say. Hours before he met Kishida, Kuroda explained in parliament a framework on how the BOJ could exit ultra-easy policy in the future. Another dovish board member, Asahi Noguchi, also said earlier this month it "won't be surprising" for the BOJ to shift monetary policy.

☆ Yen holds on to gains as traders digest BOJ surprise policy tweak
▼ + stars: | 2022-12-21 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

The currency market is still digesting the BOJ's policy tweak, said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. The BOJ decision comes as investors fret about a slowing world economy, sky-high inflation and other central banks' moves to lift interest rates. BOJ Governor Haruhiko Kuroda, who will step down in April, stressed the adjustment was not a prelude to a bigger tweak to the yield curve control policy and an eventual exit from ultra-easy monetary policy. The next policy decision the BOJ takes will likely be a major one, such as changing long-/short-term policy rate targets or terminating yield curve control altogether, according to Goldman Sachs analysts. The Antipodean currencies were wobbly after suffering big losses against the yen as rising Japanese yields threatened to kill flows into usually crowded carry trades.

☆ Analysis: Bank of Japan gives an inch, investors ready to claim a mile
▼ + stars: | 2022-12-21 | by ( Tom Westbrook | ) www.reuters.com time to read: +5 min

But rather than providing breathing room, investors say it is likely to encourage more of the sort of pressure that has bent the bond market out of shape. "Fifty basis points becomes the new 25 basis points. When trading resumed in Japan, 10-year JGB yields shot towards their new ceiling and futures fell so fast it triggered a circuit breaker suspending trade. By the end of the session, 10-year bond yields sat 14.5 basis points higher at 0.395%, the sharpest one-day rise for Japanese 10-year yields in more than 14 years. Mandatory credit Kyodo/via REUTERSThose swaps - another market measure of interest rate expectations - tracked bond yields until early this year.

☆ Premarket stocks: Japan just delivered a lump of coal to investors across the globe
▼ + stars: | 2022-12-21 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +7 min

A surprise announcement from the Bank of Japan sent investors spinning and global markets reeling on Tuesday. The country’s central bank signaled that it would reverse two decades of policy precedent and begin to move away from loose monetary policy intended to keep wages and prices high. The Japanese Central Bank loosened the yield on its 10-year government bonds from 0.25% to 0.5%. The central bank said that inflation expectations have risen. Japan’s is the last major central bank to keep rates negative and this signals that it could be shifting its stance.

The implications of the world's most dovish central bank turning hawkish are too big to ignore. Japan's net international investment position, the difference between the stock of assets it holds overseas and stock of Japanese assets held by foreigners, is more than $3 trillion. And with Japan's portfolio investment assets and liabilities totaling $7.3 trillion, big yen moves could spill over to global leverage, hedging and derivatives exposures. As Washington-based consultant and former World Bank economist Philip Suttle notes, Kuroda can justifiably claim to have ended deflation. Over his 10-year tenure as BOJ governor, consumer prices have risen an average 0.77% year-on-year, compared with average 0.13% decline in the decade before.

☆ Japan Bends to Global Forces Pushing Up Interest Rates
▼ + stars: | 2022-12-20 | by ( Megumi Fujikawa | ) www.wsj.com time to read: 1 min

Bank of Japan Gov. Haruhiko Kuroda holding a press conference in Tokyo after the central said it would let a benchmark interest rate rise to 0.5% from 0.25%. TOKYO— The Bank of Japan ‘s governor, nearing the end of a decade in office, gave markets one more surprise in the form of an interest-rate increase that he said wasn’t really an increase. It capped an event-filled year for developed-world central bankers in which the Federal Reserve lifted its benchmark rate above 4% and the European Central Bank moved up to 2%. The inflationary forces that pushed the U.S. into rapid clampdown mode proved so powerful that even Japan’s central bank, which long stuck to near-zero rates, felt it had to budge—in part to protect the value of the yen, analysts said.

☆ The Bank of Japan Steals Christmas
▼ + stars: | 2022-12-20 | by ( Jacky Wong | ) www.wsj.com time to read: 1 min

Haruhiko Kuroda said the move is aimed at improving the functioning of the government bond market. The Bank of Japan —the last central bank holdout on ultralow interest rates—has sent global markets a nasty early Christmas surprise. The Japanese central bank surprised nearly everyone in the market on Tuesday by raising its effective cap on 10-year government bond yields to 0.5% from 0.25%. Under its yield curve control policy, the BOJ has long intervened to keep bond yields within a specified target range near zero. This latest tweak effectively raised the interest rate for this tenor: 10-year yields shot up to 0.41% from around 0.25%.

☆ Falling stocks and bruised dollar reel from BOJ's surprise policy shift
▼ + stars: | 2022-12-20 | by ( Nell Mackenzie | ) www.reuters.com time to read: +3 min

LONDON, Dec 20 (Reuters) - World stocks slid on Tuesday after a policy tweak by Japan's central bank rattled investors already worried about the economic fallout of rising interest rates and untameable inflation. The policy decision caused an immediate spike in the yen, with the dollar index dropping 0.80% to 103.95, a six-month low. Japanese 10-year government bond yields surged to their highest level since 2014, with euro zone yields following suit. This knocked other currencies from recent gains, with both the euro and pound falling more than 3.5% against the yen. In the oil market, Brent crude rose 0.20% to $79.95 per barrel, while U.S. crude rose 1.3% to $76.19.

☆ Stocks, bonds fall as BOJ's surprise policy shift spooks investors
▼ + stars: | 2022-12-20 | by ( Nell Mackenzie | ) www.reuters.com time to read: +3 min

The Bank of Japan (BOJ) widened the allowable band for long-term yields to 50 basis points either side of its 0% target, from 25 basis points previously. European stock markets hit six-week lows, with the German (.GDAXI) and French benchmark indices (.FCHI) falling by as much as 1%, while London's FTSE 100 (.FTSE) lost as much as 0.8%. Japanese 10-year government bond yields surged to their highest since 2014, with euro zone yields following suit. The policy decision caused an immediate spike in the yen with the dollar index dropping 0.80% to 103.95, a six-month low. Credit Suisse on Monday upgraded its outlook from neutral to outperform for China's stock markets in the year ahead.

☆ Japan jolts markets in surprise change to yield curve policy
▼ + stars: | 2022-12-20 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

In a move explained as seeking to breath life back into a dormant bond market, the BOJ decided to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point band. 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. "Today's step is aimed at improving market functions, thereby helping enhance the effect of our monetary easing. "This change will enhance the sustainability of our monetary policy framework. It's absolutely not a review that will lead to an abandonment of YCC or an exit from easy policy."

☆ BOJ Governor Kuroda's comments at news conference
▼ + stars: | 2022-12-20 | by ( Reuters Staff | ) www.reuters.com time to read: +4 min

FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda attends a news conference in Tokyo, Japan, January 21, 2020. Following are excerpts from BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:REASON BEHIND THE BOJ’S DECISION“Overseas market volatility has heightened from around spring ... While we have kept the 10-year bond yield from exceeding the 0.25% cap, this has caused some distortions in the shape of the yield curve. It’s premature to debate specifics on changing the monetary policy framework or an exit from easy policy. “This change will enhance the sustainability of our monetary policy framework.

☆ BOJ jolts markets in surprise change to yield curve policy
▼ + stars: | 2022-12-20 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

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. Reuters GraphicsAs widely expected, the BOJ kept unchanged its 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. 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.

☆ 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.

☆ Yen soars to 4-month peak after surprise BOJ policy tweak
▼ + stars: | 2022-12-20 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

The dollar tumbled as much as 2.78% to 133.11 yen , a level last seen on Aug. 16, before last trading 2.62% weaker at 133.345. It had been slightly stronger at about 137.40 yen ahead of the policy announcement. Eyes will now be trained on BOJ Governor Haruhiko Kuroda's media briefing later in the day for additional hints about a pivot away from ultra-easy policy. Most BOJ watchers had expected no changes until his 10-year term finishes at the end of March. "Unease over China's haphazard COVID policy changes also seems to be keeping a lid on AUD/USD," Callow added.

☆ 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.

☆ Yen jumps 2.8% to 4-month peak after hawkish BOJ policy tweak
▼ + stars: | 2022-12-20 | by ( Kevin Buckland | ) www.reuters.com time to read: +1 min

[1/2] Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. The dollar tumbled as much as 2.78% to 133.11 yen , a level last seen on Aug. 16. The dollar had been slightly stronger versus the yen ahead of the policy announcement. Eyes will now be trained on BOJ Governor Haruhiko Kuroda's media briefing later in the day for additional hints about a pivot away from ultra-easy policy. Most BOJ watchers had expected no change in policy until his 10-year term ends at the end of March.

☆ Yen on defensive before BOJ; NZ dollar sinks
▼ + stars: | 2022-12-20 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

[1/2] Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. New Zealand's dollar dropped after a big decline in a survey of local business confidence. The Aussie, though, was little changed after shrugging off minutes from the Reserve Bank of Australia's last policy meeting. Ten-year Treasury yields held at a one-week high of 3.601% in Tokyo trading. Those minutes reinforced the "uncertain outlook" for policy, providing an additional weight on the Australian dollar, said Sean Callow, a strategist at Westpac.

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