The Bank of Japan policy meeting is next week, on January 17 and 18. Yomiuri (Japan media) reported today that in this meeting the Bank will review the side effects of its monetary easing and may take additional steps to correct distortions in the yield curve. You’ll recall that at the meeting in December the Bank ‘tweaked’ its yield curve control program to allow 10-year Japanese Government Bonds to trade to a 0.5% yield from the cap at the time of 0.25%. Any further ‘tweak’ along these lines would be another dilution of ultra-easy policy. Let me be clear, the move in December was small, that's why it is described as a tweak, given the vast scale of BOJ easing. Let me also be clear that even this small move from the BOJ had an outsize impact due to Bank of Japan Governor Kuroda continually denying any such change was even under consideration … right up until the bombshell dropped.

This news today prompted a dumping of USD/JPY, from highs on the session above 132.40 to lows under 131.60.

Elsewhere across major FX rates ranges were confined in small ranges with a touch of USD weakness. Traders are awaiting the US CPI report due later Thursday. There are previews linked in the posts above.

Asian equity markets mixed:

  • Japan’s Nikkei 225 flat

  • China’s Shanghai Composite -0.2%

  • Hong Kong’s Hang Seng -0.5%

  • South Korea’s KOSPI +0.3%

  • Australia’s S&P/ASX 200 +1.2%

USD/JPY:

usdyen wrap 12 January 2023