National Bond Yield Records 0.951%
Yen-Dollar Exchange Rate Surpasses 150 Yen
Market Participants Focus on Inflation Outlook
Market Shows Little Reaction to Policy Changes
The Bank of Japan (BOJ) decided to modify its Yield Curve Control (YCC) policy at the monetary policy meeting on the 31st, causing Japan's 10-year government bond yield to surpass 0.9%.
Citizens are passing in front of the Bank of Japan (BOJ) headquarters located in Tokyo, Japan. [Image source=Reuters Yonhap News]
Japan's 10-year government bond yield rose by 0.054 percentage points from the previous session to 0.951% as of 3 a.m. on the 31st in the Tokyo bond market. On that day, the 10-year yield climbed to 0.962% early in the session amid expectations of policy changes ahead of the monetary policy announcement. The BOJ announced that it would tolerate the 10-year government bond yield exceeding 1% to a certain extent.
The yen's value against the dollar fell back into the 150 yen range for the first time in five days since the 26th. In the Tokyo foreign exchange market, the yen-dollar exchange rate stood at 150.21 yen as of 3 p.m. The yen had risen to the low 149 yen range following reports that the BOJ might revise the YCC policy, but then weakened again. Bloomberg interpreted this policy revision as not delivering a significant shock to market participants. Bloomberg explained, "Investors have not shaken off the belief that the BOJ is unusually committed to easing policies for economic stimulus, unlike other global central banks."
Some view that the market's reaction was more focused on the BOJ's inflation outlook than on the YCC revision. The BOJ raised its inflation forecasts for this year and next year to 2.8% each. However, it projected the inflation rate for 2025 at 1.7%, suggesting the possibility of a slowdown in inflation going forward. Major foreign media explained, "Market participants focused on the forecast that inflation will slow to below 2% in 2025, which caused the yen to plummet against the dollar."
Stock prices recorded a slight rise. The Nikkei 225 stood at 30,858.85 yen at 3:31 p.m., up 0.53% from the previous closing price of 30,696.96. Shingo Ide, senior researcher at Nissei Basic Research Institute, said, "Since the BOJ has continuously conveyed to the market its intention to reduce easing policies, there has already been a certain level of caution in the stock market. Therefore, this policy revision is unlikely to have a negative impact on the stock market."
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