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Dallas
Tuesday, February 7, 2023
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Bank of Japan pivot bombshell – widening 10yr JGB band to 0.5% (from 0.25). Yen up

Yen has surged and Nikkei (Japan shares) trashed.

The initial headlines were that the BOJ had left its policy unchanged, which they have.

BUT they widened that band in which they allow the 10 yr JGB to move from 0.25% to 0.5%. This, in effect, is a long-awaited ‘pivot’ from the BOJ. A mini pivot for sure, but given nothing was expected until April, its significant.

More significant items from the statement:

  • to increase bond purchases to JPY 9tln/month in Q1
  • will review operation of Yield Curve Control (YCC)
  • to conduct additional JGB purchases on December 22

In widening the band for the JGB target, the BOJ says that “the functioning of bond markets has deteriorated… If these market conditions persist, this could have a negative impact on financial conditions.”

JPY has surged, USD/JPY plunged to circa 134.30 while the Nikkei dropped (futures trade is active, down over 4%, physical is closed for the lunch break … traders getting indigestion as we speak)

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