Bank of Japan pivot bombshell – widening 10yr JGB band to 0.5% (from 0.25). Yeah up

Yen has surged and Nikkei (Japan shares) trashed.

The initial headlines were that the BOJ had left its policy unchanged, which they have.

  • to maintain a -0.1% target for short-term rates
  • and a 0% cap for the 10-year bond yield

BUT they widened that band in which they allow the 10 yr JGB to move from 0.25% to 0.5%. This, in effect, is a long-awaited ‘pivot’ from the BOJ. A mini pivot for sure, but given nothing was expected until April, its significant.

More significant items from the statement:

  • to increase bond purchases to JPY 9tln/month in Q1
  • will review operation of Yield Curve Control (YCC)
  • to conduct additional JGB purchases on December 22

In widening the band for the JGB target, the BOJ says that “the functioning of bond markets has deteriorated… If these market conditions persist, this could have a negative impact on financial conditions.”

JPY

JPY

The Japanese yen (JPY) is the official currency of Japan and at the time of writing is the third most-traded currency in the world behind only the US dollar and euro. forex traders as a safe haven currency.Originally implemented in 1871, the JPY has had a long history and has survived multiple world wars and other events. This was followed by the creation of the Bank of Japan (BoJ) in 1882 and the full oversight of the JPY by the Japanese government only in 1971.Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ also adheres to a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policyWhat Factors Affect the JPY?The aforementioned role of the BoJ has dramatically shaped the JPY in forex markets. Any further changes in monetary policy by the central bank are closely watched by forex traders. Additionally, the Overnight Call Rate is the key short-term inter-bank rate. The BoJ utilizes the call rate to signal monetary policy changes, which in turn impact the JPY. The consequent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important to the JPY. The most important of these releases in Japan are gross domestic product (GDP), the Tankan survey (quarterly business sentiment and expectations survey), international trade, readings of unemployment, industrial production, and money supply (M2+CDs).

The Japanese yen (JPY) is the official currency of Japan and at the time of writing is the third most-traded currency in the world behind only the US dollar and euro. forex traders as a safe haven currency.Originally implemented in 1871, the JPY has had a long history and has survived multiple world wars and other events. This was followed by the creation of the Bank of Japan (BoJ) in 1882 and the full oversight of the JPY by the Japanese government only in 1971.Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ also adheres to a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policyWhat Factors Affect the JPY?The aforementioned role of the BoJ has dramatically shaped the JPY in forex markets. Any further changes in monetary policy by the central bank are closely watched by forex traders. Additionally, the Overnight Call Rate is the key short-term inter-bank rate. The BoJ utilizes the call rate to signal monetary policy changes, which in turn impact the JPY. The consequent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important to the JPY. The most important of these releases in Japan are gross domestic product (GDP), the Tankan survey (quarterly business sentiment and expectations survey), international trade, readings of unemployment, industrial production, and money supply (M2+CDs).
Read this Term has surged, USD/JPY plunged to circa 134.30 while the Nikkei dropped (futures trade is active, down over 4%, physical is closed for the lunch break … traders getting indigestion as we speak)

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