PREVIOUS TRADING DAY EVENTS 28 July 2023

The Bank of Japan BOJ left rates unchanged again, BOJ Policy Rate remained at 0.10. The Policy Board decided to conduct yield curve control with greater flexibility, surprising the market with a yield curve control tweak.

While the BOJ kept interest rates at ultralow levels, it said the tweak to its bond yield curve control scheme YCC would allow it to respond nimbly to risks including rising price pressures.

BOJ maintained guidance allowing the 10year yield to move 0.5 around the 0 target, but said those would now be references rather than rigid limits.

The BOJ said it would offer to buy 10year Japanese government bonds at 1.0 in fixedrate operations, instead of the previous rate of 0.5, signalling that it would now tolerate a rise in the 10year yield to as much as 1.0.

Although the BOJ left the cap unchanged at around 0.50, the subtle changes in language suggest that they are gearing up, or at least open to, tweaking the YCC target at a future date, provided that conditions are supportive, said Carlos Casanova, senior Asia economist at UBP in Hong Kong.

In its quarterly outlook report, the BOJ revised this years core consumer inflation forecast to 2.5 from 1.8 projected in April.

Source httpswww.reuters.commarketsratesbondsbojseenkeepingultralowratesmaydebatetweakyieldcap20230727

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