On Friday, June 17, the Bank of Japan issued an interest rate resolution, maintaining the benchmark interest rate at a historical low of -0.1%, and maintaining the 10-year government bond yield target near 0% (i.e. bond yield curve control policy YCC), in line with market expectations.
The Bank of Japan said in its guidance that it expects short-term and long-term policy rates to remain at "current or lower" levels and will purchase 10-year Japanese government bonds at a yield level of 0.25% every working day, maintaining forward guidance on interest rates. No change, we vow to carry out the relaxation to the end.
At the same time, in response to the possible impact of the recent sharp decline of the yen on the economy, the Bank of Japan rarely stated that it must "pay close attention" to the impact that exchange rate changes may have on the economy.
This decision of the Bank of Japan has attracted market attention because some traders on Wall Street have begun to short Japan. They are betting that the Bank of Japan may move closer to the tightening policies of other countries around the world central banks . The decision was made at today's meeting A decision that surprised the market. In early trading on Friday before the
meeting, the market yield on 10-year Japanese government bonds hit a six-year high of 0.268%, exceeding the Bank of Japan's 0.25% limit.
In the first round of confrontation on June 15, Japanese bond short sellers faced off against the Bank of Japan at lightning speed, and finally won a big victory. On that day, Japan's 10-year government bond futures plunged 2.01 yen during the session, the largest single-day drop since 2013, and triggered the Osaka Exchange's circuit breaker mechanism twice.
After the release of the Bank of Japan's interest rate decision today, the yen fluctuated violently against the US dollar. The yen's exchange rate against the US dollar first fell sharply by 1.7% to 134.46 yen per US dollar. Then it quickly rose by about 200 points, once touching 132.49 to regain lost ground, but as of press time, it fell back to around 134.5 again.
USD/JPY exchange rate trend (intraday line chart)
htmlThe market yield of 010-year Japanese government bonds once fell back to 0.22%"Some people speculate that the Bank of Japan may adjust its policy in response to exchange rate fluctuations, but the central bank's answer is no. "," Shotaro Kugo, an economist at Japanese think tank Daiwa Research Institute, said that although stable currency trends are important to achieve its price targets, it will not focus on the yen trend to guide policy.
With Japan's inflation rate well below that of Western economies, the Bank of Japan is in a dilemma.
The policy of continuing to support the weak economy with low interest rates has opened up a clear gap with the major Western central banks. The Federal Reserve After Wednesday raised interest rates 75 basis points, the European Central Bank pledged to curb market pressure at an emergency meeting this week, which will be held at the end of September. Before starting to raise interest rates. On Thursday, the Swiss National Bank unexpectedly raised interest rates by 50 basis points, while the Bank of England also raised interest rates again.
This has triggered a sharp decline in the yen, which is currently at a 24-year low. This will not only damage the manufacturing industry that relies heavily on the import of fuel and raw materials, but will also increase the cost of importing goods and affect consumption.
Bank of Japan Governor Kuroda Haruhiko said at the press conference after the release of the interest rate decision that relaxing epidemic control has had an impact and the Japanese economy is recovering. CPI may currently remain around 2% and may slow down later.
He said the rapid rise in long-term government bond yields in the United States and Europe had a significant impact on Japanese government bond yields, making yield curve control (YCC) necessary. The uncertainty of the Japanese economy is very high, and we need to pay attention to the impact of the exchange rate on the economy and prices. If necessary, we will not hesitate to increase the easing policy. As Japan's capital spending remains solid, foreign exchange movements may not have a serious impact on business confidence.
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