The Bank of Japan surprised those predicting a change in its monetary policy direction by announcing the decision not to make any changes to its YCC (Yield Curve Control) strategy.
Thus, the target on the fluctuation range of Japanese government bond rates remains in effect, which was changed at the meeting in December, from the previous range between -0.25% and 0.25% to the new band, including between -0.5% and +0.5%.
The change made to the tolerated range of fluctuations in interest rates had led the markets to bet on a change of course by the central bank of Japan, forced according to several economists to become more hawkish, in the face of inflation that also flared up in Japan beyond the 2% target set by the monetary authority.
Bets on a BOJ turnaround had sent 10-year Japanese government bond yields soaring above their maximum target (0.5%) several times.
Following today’s announcement by the Bank of Japan, bond rates immediately tumbled to 0.385%.
The Bank of Japan’s failure to act hawkish immediately translated into a sharp decline in the yen, with the USD-JPY rallying 2.6% to JPY 131.47.
The Nikkei 225 index of the Tokyo Stock Exchange marks a rise of more than +2%.
The BoJ, white fly among the main central banks in the world for the ultra-expansionary monetary policy that it continues to pursue – based on negative rates and on an unleashed QE to say the least – has also announced that it has left the cost of money unchanged at -0 .1%, thus also confirming its negative interest rate policy.