BOJ raises ceiling for long-term rates, monetary easing to stay

BOJ raises ceiling for long-term rates, monetary easing to stay

BOJ raises ceiling for long-term rates, monetary easing to stay

With Japanese monetary policy still seen stimulatory, the dollar will likely climb to 112.50 yen in the short-term and could challenge the 113-yen barrier, according to Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

The BOJ added language to its bond buying program stating that "the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices".

The big news out of the central bank is that it would make its policy framework more flexible for the long-term yield target.

The BOJ on Tuesday made adjustments to two pillars of its policy that could be interpreted as steps towards normalisation: It said it would let the 10-year yield rise just a bit higher, to 0.2 per cent from 0.1 per cent, and it cut in half the amount of bank reserves that would face its negative rate of minus 0.1 per cent.

The dollar was 0.69 percent higher against the yen JPY=, on pace for its best day in almost three weeks, and was set to finish the month 1 percent higher, its second straight monthly gain. The benchmark 10-year Japanese government bond dropped five basis points after the announcement.

Government bond prices reversed the previous day's sharp gains, which came after the central bank pledged to keep interest rates low for an extended period, eliminiating earlier specualtion that it might shift to a much tighter monetary setting.

Overall purchases of exchange-traded funds are kept at ¥6 trillion (RM216 billion), but those linked to the Topix will increase to ¥4.2 trillion, from ¥2.7 trillion, further reducing the weighting of the narrower Nikkei 225.

China says United States ‘blackmail’ won’t work, warns of retaliation on tariffs
Beijing retaliated with matching tariffs on the same amount of U.S. exports to China. He also has threatened a further round of tariffs on $300 billion of Chinese goods .

In a quarterly review of its projections also released on Tuesday, the BOJ trimmed its price forecasts and conceded inflation could fall short of its target for three more years.

The technology index crumbled 1.8 percent overnight as disappointing results from Facebook, Twitter and Netflix spurred concerns about future growth for a sector that has led USA equities to record highs.

"They tried their best to avoid the perception of tapering or normalisation by introducing the forward guidance", said Nagai. "The guidance is vague but gives some assurance that the current easing measures will continued at least into fiscal 2020, after checking the side effects of the planned consumption tax hike".

Indeed, the BOJ had to lend 1.36 trillion yen of JGBs, including nearly 800 billion yen of the benchmark 10-year JGBs, to short sellers on Tuesday.

On Monday, to stem rising yields, the BOJ conducted an unlimited buying in 10-year JGBs, sucking up 1.64 trillion yen of JGBs from the market, aggravating the shortage of available bonds in the market.

Kuroda has consistently emphasized the need to stay the course with stimulus.

The BOJ has been pursuing the two percent inflation target since Kuroda took office in 2013 in a bid to lift Japan out of years of deflationary stagnation.

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