• News
    • Stocks
    • Banks and Finance
    • Companies
    • Crypto
    • Forex
  • Videos
  • Articles
    • Forex CRM
    • Crypto Payments
    • Trading
    • Crypto Exchange Business
    • Forex Business
    • Fintech
    • Liquidity
    • FinTech Awards
  • Liquidity Providers List
  • Crypto Payment Providers

Dark Theme

How the Bank of Japan Shocked Global Markets with its Surprise Policy Change

Dec 21, 2022

How the Bank of Japan Shocked Global Markets with its Surprise Policy Change

Have we reached the tipping point?

The Bank of Japan surprised markets on Tuesday with a decision to loosen its cap on 10-year government bond yields, a move that has sent shockwaves across the global market. This development is seen as possibly signaling a shift towards tighter monetary policy from the last major central bank still holding an ultra-loose stance.

While financial analysts speculated about the implications of the move, the market reaction revealed investors were concerned the Japanese central bank may put an end to serving as the last major pillar supporting the low-interest rates policy.

Deutsche Bank analyst Jim Reid noted that the recent market action is seen among investors as an indication of a larger shift.

During a meeting held as part of its regular policy planning, the Bank of Japan said the 10-year Japanese government bond yield might increase to 0.5% from the current 0.25%. Previously, the central bank kept its benchmark government bond yield within a target range of zero percent since 2016 as part of an effort to hold interest rates in the market at a low level.

According to the Bank of Japan, the move was motivated by concerns over the stability of the government bond market rather than inflation.

Market Reaction

The Japanese yen surged on the currency markets, gaining more than 3% against the US dollar. Meanwhile, yields on 10-year Japanese government bonds rose 16 basis points to 0.413%, reaching the highest level in seven years. The sharp rise in global bond yields also caused a spike in US Treasury yields. These events weighed down the dollar, with the ICE US Dollar Index falling by 0.7%.

Earlier this year, the widening interest rate differential between the Japanese and other developed markets triggered a steep sell-off of the yen, causing the currency to hit a decade-low against the greenback.

Asian equity markets saw a broad sell-off on Tuesday, with Japan's Nikkei plunging more than 2%, as the rise in bond yields weighed heavily on regional stocks. Elsewhere, European and US markets had a more muted reaction, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite reversing earlier losses to end the day slightly higher, marking an end to four days of losses.

Rumors of Policy Change

An underlying shift in policy has been rumored for some time.

The US Treasury market reacted on Monday to a report from Kyodo News last week claiming that Japanese Prime Minister Fumio Kishida may be considering changing the country's 2% inflation target. The report suggested that after appointing a new central bank governor, likely in April, Kishida could discuss details of revising the decade-long agreement with the Bank of Japan. Markets are now eagerly awaiting the outcome of these potential changes.

Japan's central bank has spent a great deal of money to keep the 10-year yield cap in place. This was due to central banks around the world increasing their policy tightening, and global bond yields have been on the rise the whole year, said Robin Brooks, the Institute of International Finance's strategist. The analyst warned that the Bank of Japan might face even greater pressure if the markets "smell blood."

Adam Cole, RBC Capital Markets's analyst, suggested that despite speculation of the move in 2023 when current Bank of Japan governor Haruhiko Kuroda's term ends, nothing is likely to occur in the coming months. This view is widely held among many experts and investors.

Aside from forward guidance and the policy balance rate, other policy aspects stayed the same, with the statement emphasizing the importance of widening the target band as a way to improve market performance, as opposed to referring to it as a policy tightening, the strategist noted.

The market has reacted sharply to the Bank of Japan's decision in the face of illiquid conditions. According to analysts, the Japanese Yen may continue to strengthen. While investors had cut their positions recently, they were still net long USD/JPY prior to the Bank of Japan's decision, and the covering of these JPY shorts could push the currency to new highs.

Subscribe Our Newsletter

These Closed-End Funds Are on Sale for the Holidays
These Closed-End Funds Are on Sale for the Holidays

That is most certainly not the situation in shops, where supply-chain concerns in 2021 have made Christmas markdowns scarce. However, in a rather obscure financial industry sector known as closed-end funds, some substantial discounts have surfaced.

Stocks
Tech Stocks Are Bouncing Back. Here’s Why
Tech Stocks Are Bouncing Back. Here’s Why

"Despite the headlines about Meta and other conspicuous technology businesses, the sector's fourth-quarter profits are looking quite strong," said Dave Donabedian, chief investment officer at CIBC Private Wealth Management.

Stocks
Liquidity Provider

What is NFT?
The realm of digital art and collectibles is being taken over by NFTs. The rise of a new crypto-audience is reshaping the fortunes of digital artists. Celebrities are also hopping on board, seeing this as a fresh opportunity to interact with their fan bases.

discover
What is the Liquidity Ratio?

Liquidity Provider

What is the Liquidity Ratio?

The notion of liquidity is exceptionally important in all financial markets, as traders/investors want to understand how many chances they have to buy and sell a certain asset by the market price.

Liquidity

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries b2broker

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Alexander

    Full Bitcoin Price History: From 2009 to 2022

    https://liquidity-provider.com/app/uploads/2023/01/cover-11-300x203.png

    Constantine

    Top 5 Most Reliable KYC Technology Providers

    https://liquidity-provider.com/app/uploads/2023/01/cover-10-300x203.png

    Alexander

    The Best Crypto Wallets of 2022: Top 5 Picks

    https://liquidity-provider.com/app/uploads/2023/01/cover-2-300x203.png

    Alexander

    Top 5 Most Reliable Forex Brokers of 2022

    https://liquidity-provider.com/app/uploads/2023/01/cover-1-300x203.png

    Constantine

    5 Top-Tier Breakthrough Trading, Crypto and Fintech Industries Software Solutions in 2022

    https://liquidity-provider.com/app/uploads/2023/01/cover-300x203.png

    Constantine

    5 Most Successful FinTech Industry Startups in 2022

    https://liquidity-provider.com/app/uploads/2022/12/cover-300x203.png

    Constantine

    Top 7 Liquidity Providers of 2022

    https://liquidity-provider.com/app/uploads/2022/12/liquidity-provider-3-300x203.png

    Alexander

    Top 5 Crypto Exchanges of 2022

    https://liquidity-provider.com/app/uploads/2022/12/liquidity-provider-1-300x203.png

    Constantine

    Top 5 Most Distinguished White Label Solutions in 2022

    https://liquidity-provider.com/app/uploads/2022/12/liquidity-provider-2-300x203.png

    Constantine

    What is Crypto Leverage Trading And How Does It Work?

    https://liquidity-provider.com/app/uploads/2022/12/oblozhka-5-300x203.png

    Constantine

    Top 5 Most Prospective Tokens in the Metaverse.

    https://liquidity-provider.com/app/uploads/2022/12/cover-7-300x203.png

    Constantine

    How to Mine Bitcoins? – Beginners Guide

    https://liquidity-provider.com/app/uploads/2022/11/cover-5-300x203.png

    Oliver

    Blockchain for Business. Pros & Cons

    https://liquidity-provider.com/app/uploads/2022/11/oblozhka-1-300x203.png

    Constantine

    The Future of Stablecoins and Central Bank Digital Currencies (CBDCs)

    https://liquidity-provider.com/app/uploads/2022/11/cover-3-300x203.png

    Alexander

    What is Web 3.0 and Why Does it Matter?

    https://liquidity-provider.com/app/uploads/2022/11/cover-1-300x203.png

    Constantine

    5 Benefits of Accepting Crypto Payments for Your Business

    https://liquidity-provider.com/app/uploads/2022/11/cover-300x203.png

    Constantine

    Hot Wallet vs Cold Wallet: Which Do I Need More for Crypto?

    https://liquidity-provider.com/app/uploads/2022/11/oblozhka-5-300x203.png

    Alexander

    What is Hedging and How Does it Work in Trading? — Ultimate Guide

    https://liquidity-provider.com/app/uploads/2022/10/oblozhka-4-300x203.png

    Oliver

    Pre-execution vs Post-execution: What’s the Difference?

    https://liquidity-provider.com/app/uploads/2022/10/oblozhka-1-300x203.png

    Constantine

    What is Slippage in Trading? – Definition

    https://liquidity-provider.com/app/uploads/2022/10/shapka-1-1-300x203.png

    Oliver

    How Forex Brokers Make Money? – A-Book vs. B-Book Model

    https://liquidity-provider.com/app/uploads/2022/10/shapka-2-300x203.png

    Oliver

    What is the Ethereum Merge, And How Will it Change Ethereum?

    https://liquidity-provider.com/app/uploads/2022/10/shapka-1-300x203.png

    Alexander

    How to Spot Cryptocurrency Scams

    https://liquidity-provider.com/app/uploads/2022/10/shapka-300x203.png

    Milena

    Exploring the Metaverse: What Does It Mean for the Future of the Internet?

    https://liquidity-provider.com/app/uploads/2022/10/oblozhka-300x203.png
    • News
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
    • Articles
      • Forex CRM
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
    [email protected]

    © 2023 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy