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

Date:

Yen has risen and Nikkei (Japanese stocks) has been smashed.

The first headlines were that the BOJ left its policies unchanged, which they did.

  • to hold a target of -0.1% for short-term interest rates
  • and a 0% limit on the 10-year bond yield

BUT they have broadened that band where they allow the 10 year JGB to go from 0.25% to 0.5%. This is, in fact, a long overdue “pivot” from the BOJ. A mini-pivot for sure, but since nothing was expected until April, it’s significant.

More key items from the statement:

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

In widening the range for the JGB target, the BOJ says that “the functioning of the bond markets has deteriorated… If these market conditions continue, it could negatively impact financial conditions.”

Japanese Yen

Japanese Yen

The Japanese yen (JPY) is the official currency of Japan and, at the time of writing, the third most traded currency in the world, behind only the US dollar and the euro. The JPY is widely used as a reserve currency and is used by forex traders as a safe haven currency. Originally implemented in 1871, the JPY has a long history, surviving multiple world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full supervision of the JPY by the Japanese government only in 1971. Japan has traditionally pursued a policy of currency intervention, which continues to this day continues. The BoJ also adheres to zero-to-near-zero interest rates, and the Japanese government has previously pursued strict anti-inflation policies. Any further changes in monetary policy by the central bank will be closely watched by forex traders. In addition, the Overnight Call Rate is the leading short-term interbank rate. The BoJ uses the call rate to signal monetary policy changes, which in turn affect the JPY. The BoJ also buys both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The resulting yield on the benchmark 10-year JGBs helps serve as an important indicator of long-term interest rates. Economic data is also very important for the JPY. The most important of these publications in Japan are gross domestic product (GDP), the Tankan survey (quarterly survey of entrepreneurial sentiment and expectations), international trade, measures 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, the third most traded currency in the world, behind only the US dollar and the euro. The JPY is widely used as a reserve currency and is used by forex traders as a safe haven currency. Originally implemented in 1871, the JPY has a long history, surviving multiple world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full supervision of the JPY by the Japanese government only in 1971. Japan has traditionally pursued a policy of currency intervention, which continues to this day continues. The BoJ also adheres to zero-to-near-zero interest rates, and the Japanese government has previously pursued strict anti-inflation policies. Any further changes in monetary policy by the central bank will be closely watched by forex traders. In addition, the Overnight Call Rate is the leading short-term interbank rate. The BoJ uses the call rate to signal monetary policy changes, which in turn affect the JPY. The BoJ also buys both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The resulting yield on the benchmark 10-year JGBs helps serve as an important indicator of long-term interest rates. Economic data is also very important for the JPY. The most important of these publications in Japan are gross domestic product (GDP), the Tankan survey (quarterly survey of entrepreneurial sentiment and expectations), international trade, measures of unemployment, industrial production and money supply (M2+CDs).
Read this term is up, USD/JPY tumbled to around 134.30 while the Nikkei fell (futures trading is active, down over 4%, physically closed for lunch…traders are getting indigestion right now)

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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