Dollar Yen Soars After Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band

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    BMO Note

    “Let us not forget that the strength of the yen will not only be a welcome development in Tokyo, but it also marks a potential pivot for the hedging costs for Japanese investors looking to buy Treasuries and hedge the returns back into local currency. A move that is sufficient to bring in sidelined buyers has yet to be achieved; although the momentum has clearly shifted in a direction that will ultimately be favorable for Treasuries. The Fed’s arrival at terminal will also carry with it a collective sense of near-term policy stability that should encourage investors to reenter the Treasury market – at least from the perspective that the uncertainty associated with how far Powell would need to hike will be resolved. Recall that 2022 was the year of the revision (terminal estimate and otherwise); once the FOMC reaches the endpoint, policy rate vol will decline as Powell attempts to hold the restrictive line, as it were.”


    USD/JPY is now down 502 pips on the day to 131.86, which is the lowest since August.

    The August low was 130.39 and that’s the main support line on the chart.


    Bank of Japan Governor Kuroda spoke on Monday in a speech delivered to the business lobby Keidanren.

    Speech by Governor KURODA at the Meeting of Councillors of Keidanren (Toward Achieving the Price Stability Target in a Sustainable and Stable Manner, Accompanied by Wage Increases)

    Kuroda’s key remarks once again reiterated his view that ultra-easy monetary policy would be sustained. Kuroda said that the widening of the tolerance band within which the 10-year JGB would be allowed to fluctuate, to +/-0.5% from +/- 0.25% previously, was aimed at improving market function.

    “This is definitely not a step towards an exit”
    the BOJ will maintain “utmost support” for the economy by keeping accommodative financial conditions in place.
    “The bank will aim to achieve the price stability target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under the framework of yield curve control.”

    “Labour market conditions in Japan are projected to tighten further and firms’ price- and wage-setting behaviour is also likely to change.”
    “We are approaching a critical juncture in breaking out of the prolonged period of low inflation and low growth since the collapse of the bubble economy.”

    Helmholtz Watson

    The Bank of Japan as widely expected kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield. Ther
    [See the full post at: Dollar Yen Soars After Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band]

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