Heading into the policy decision, market expectations were brought up in anticipating a change to the 10-year JGB yields ceiling i.e. from 1% to perhaps 1.25% or 1.50%. However, the BOJ instead chose to keep the focus on the 1% mark by making it a sort of point of reference as they say that:
“The Bank will maintain the target level of 10-year Japanese government bond (JGB) yields at around zero percent, it will conduct yield curve control with the upper bound of 1.0% for these yields as a reference and will control yields mainly through large-scale JGB purchases and nimble market operations.”
That was enough to really drag the yen currency lower, as market expectations were disappointed. For all the talk about pivoting more hawkishly heading into next year’s shunto, this is yet again another example of how the BOJ is failing to take a more proactive approach. It has been the case since Ueda took over in April and time and time again, yen bulls are the ones getting hurt.
USD/JPY hourly chart
USD/JPY has now shot back up to test the 150.00 mark and could look to break that later in the day, with the dollar able to find some steadier footing now after yesterday’s slip up.