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Why the BOJ’s Policy Was Such a Surprise Change

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The yen gained over 300 pips and the Tokyo stock market crashed. This was a huge move that caused Japanese bond futures to trip a circuit breaker, and they had to be temporarily suspended. The global implications of this move are covered in a variety of articles. Just yesterday, everyone thought that BOJ meeting would be another “meh”. What has happened?

Understanding the BOJ

First, there was unanimity among economists polled by Bloomberg ahead of the meeting that the BOJ wouldn’t change its policy at this meeting. Yesterday, we discussed the possibility that the BOJ might adjust its yield curve policy. And it did – just sooner than expected.

The BOJ loves to surprise markets. Other central banks prefer telegraphing moves to prepare markets and reduce chaos. The BOJ believes that a more effective policy will result in a stronger response when markets are shocked. That’s possibly an explanation for why they went ahead with this policy tweak now, and didn’t provide any warning it was coming.

What does it signify?

Back in 2016, the BOJ implemented a policy called “yield curve control”. This means that bonds’ yields can rise or fall above…



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