BoJ suprises markets and holds on yield curve controls
Stockmarket surges, yen falls as era of cheap cash continues
The Bank of Japan surprised markets on Wednesday and left its yield curve control (YCC) measures unchanged as it maintained its cheap-money policy, sparking a surge in equities, but sending the domestic currency lower.
Markets had been expecting a change to the BoJ’s super-loose monetary policy after the central bank in December allowed the yield of the 10-year bond to move 0.5% away from its 0% target, instead of the previous 0.25% range limit set.
The BoJ kept short-term policy rates at -0.1% and long-term rates at around 0%. The tolerance range for 10-year government bond yields, which was expanded at the last meeting, was also maintained at +/-0.50%.
“We think that the BoJ will continue to stick to its current YCC policy, after leaving YCC unchanged today. The BoJ will continue to be forced to intervene in the Japanese government bond market actively in the coming quarters, but a slowdown in inflation together with calming global yields should gradually alleviate upward pressures on the yield curve in H2 2023,” said analysts at Oxford Economics.
Reporting by Frank Prenesti for Sharecast.com