The Bank of Japan reiterated its ultra-loose monetary policy with four days of unscheduled bond buying as the widening interest rate gap with the US puts upward pressure on bond yields and weakens the yen.
THE Bank of Japan reiterated its ultra-loose monetary policy with four days of unscheduled bond buying as the widening interest rate gap with the US puts upward pressure on bond yields and weakens the yen.
The BOJ said actions were taken in light of recent yield moves and that consecutive fixed rate operations are aimed at firmly attaining the bank’s yield curve control target. During its week-long tussle with markets last month, the BOJ said it would ramp-up its scheduled purchases before the market open, drawing attention to its determination to keep a lid on yields. This time round, it was less aggressive as it left scheduled purchase amounts unchanged and advised on its fixed-rate buying at the usual operation time, helping to avoid unduly adding to yen-selling appetite.
The BOJ announces its latest policy decision on Thursday next week when it is also due to release inflation forecasts that are expected to show much stronger price growth this fiscal year. While economists are expecting it to hold firm with policy, should market pressure on the yen and yields intensify in the intervening days, speculation of a tail-risk surprise could grow.
Joseph Capurso at Commonwealth Bank of Australia said in a note the odds were rising, though “we do not know what level of dollar-yen is the ‘line in the sand.’” Kato at Shinkin said the probability remains low.
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