PREVIOUS TRADING DAY EVENTS 31 Oct 2023

The Bank of Japan further loosened its grip on longterm interest rates by tweaking its bond yield control policy again, while keeping ultralow interest rates steady. As widely expected, the BOJ maintained its 0.1 target for shortterm interest rates and that for the 10year government bond yield around 0 set under yield curve control YCC.

The BOJ watered down its 1 cap on the 10year bond yield which it set just three months ago to allow longterm borrowing costs to rise more.

We still havent seen enough evidence to feel confident that trend inflation will sustainably hit 2, BOJ Governor Kazuo Ueda told a press briefing after the decision. As such, we dont see a big risk of being behind the curve.

Ueda said the BOJ will no longer forcefully cap longterm rates at 1 but step in to avoid the 10year yield from sharply moving above that level, adding that the tweak was aimed at making YCC more flexible.

Through all the linguistic contortions, the fact is that they are dismantling YCC, said Tom Nash, portfolio manager at UBS Asset Management in Sydney, who is positioned for a rise in Japanese yields. A yield cap isnt a yield cap if you change it every time the market gets close.

Source httpswww.reuters.commarketsasiabojlikelyliftinflationforecastsdebateyieldcontrolsfuture20231030

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