© Reuters. FILE PHOTO: A man runs past the Bank of Japan (BOJ) building in Tokyo, Japan, July 29, 2016. REUTERS / Kim Kyung-Hoon
(Reuters) – The Bank of Japan slightly loosened constraints on its 10-year yield target and said it would review its yield-curve control policy, taking financial markets by surprise and causing the yen to rise sharply.
Here are some comments from the experts:
KERRY CRAIG, GLOBAL STRATEGY, JP MORGAN ASSET MANAGEMENT, MELBOURNE:
“This move came earlier than I expected, but is a step towards policy normalization in Japan. However, this is only the first step and yield curve control (YCC) remains to be seen. applied, as well as a negative interest rate strategy.
“Further adjustments will require the view that inflation has become persistent and YCC is probably no longer needed, or that the negative impact of YCC is outweighing the supportive effects of rising inflation. The most pervasive market impact in the forex market…suggestion that the BOJ is moving away from ultra-easy policy should keep the yen positive in the near term.”
CAROL KONG, MONEY Strategist, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:
“I think this move was definitely unexpected, to say the least. And the dollar/yen just got a big sell-off after the YCC revision, and I think that paves the way for a complete abandonment. program YCC, and perhaps a pivot away from the extremely dovish monetary policy stance going forward.”
AYAKO FUJITA, Chief ECONOMY, JP MORGAN SECURITIES COMPANY, TOKYO:
“Because it is difficult to adjust this program after the market has fully priced it in, the decision is a logical one – the BOJ cannot continue to let the market expect (change).
“Regardless of whether the leadership is Kuroda or the new governor, an adjustment is expected to some extent due to the changing fundamentals, where price inflation and yield expectations are actually increasing. go up.
“We don’t expect further adjustments to the YCC (in the January and March meetings) as that would harm market functions.”
MOH SIONG SIM, MONEY Strategist, SINGAPORE BANK:
“They’ve widened the margin, and I guess that’s happened earlier than expected. This raises the question of whether this is a foreshadowing of much to come, in terms of policy normalization.
“The clear indication that perhaps the sharp yen weakness we’ve seen before is unsettling policymakers…it’s clear that it adds to the narrative of yen strength. in the next year.”
CHRISTOPHER WONG, MONEY Strategist, OCBC, SINGAPORE:
“The timing of the policy adjustment was a surprise, although we had expected the move to happen in the second quarter of 2023.
“This adjustment may seem modest but has significant implications for a central bank that has maintained dovish policy for a long time. The implication is a modest improvement from the UST-yield spread. Wide JGB…and mid-to-softer USD configurations could lead to more downside in.”