From yesterday, ICYMI:
Follow through for the yen in Europe and America times:
- ForexLive European FX news wrap: Yen flying high after BOJ policy tweak
- Forexlive Americas FX news wrap: Yen hits new highs as the BOJ fallout continues
Deutsche Bank on the BOJ's "surprise change to their yield curve control policy"
- The BoJ have framed this decision around market functioning, with Governor Kuroda saying that this was not a rate hike.
- And to be fair, they did announce an increase in bond purchases to 9 trillion yen per month, up from 7.3 trillion yen.
- Nevertheless, these moves are justifiably being seen as the beginning of a move away from the ultra-loose monetary policy of recent years and with global implications.
As to why now:
several factors lie behind the BoJ’s decision to act today
- The biggest is the upcoming reshuffle at the Bank of Japan, since officials may have felt that sticking too strongly to easing might encourage the selection of a more hawkish governor favouring aggressive policy normalisation.
- Other factors include lower global yields in recent weeks that have eased the upward pressure on Japanese yields, which in turn means the BoJ may have felt the shock from a YCC change wouldn’t be as big.
- There must also be a timing element with the Christmas holidays, since few overseas investors will be actively selling JGBs and with many across the globe on holiday.
1 and 2, yeah.
3 I'm not so sure of. There would have been plenty of phones ringing in the dead of night right across bond-trader land on this pivot bombshell shock.
Happy holidays.
