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The yen rallied and the Nikkei (Japanese stocks) fell out of the bin.

Initial headlines were that the BOJ had left policy unchanged, which they did.

  • maintain -0.1% target for short-term interest rates
  • and a 0% cap on a 10-year bond yield

BUT they widened that range where they allow the 10 year JGB to move from 0.25% to 0.5%. This is essentially a long-awaited “pivot” by the BOJ. A mini pivot, sure, but considering nothing was expected until April, it’s significant.

More important points from the announcement.

  • increase bond purchases to JPY 9 trillion/month in Q1
  • will review yield curve control (YCC) activities
  • make additional JGB purchases on December 22

Broadening the scope of the JGB target, the BOJ said “the performance of bond markets has deteriorated… If these market conditions persist, it could have a negative impact on financial conditions.”

JPY:

JPY:

The Japanese yen (JPY) is the official currency of Japan and at the time of writing is the third most traded currency in the world after only the US dollar and the euro. JPY is widely used as a reserve currency and is relied upon by Forex traders as a safe haven currency. Originally introduced in 1871, the JPY has had a long history and has survived many world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full control of the JPY by the Japanese government only in 1971. Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ is also committed to a zero-to-near-zero interest rate policy, and the Japanese government has pursued a strong anti-inflationary policy in the past. What factors influence the JPY? Any further changes in monetary policy by the central bank are closely watched by forex traders. In addition, the overnight call rate is the main short-term interbank rate. The BoJ uses the call rate to signal changes in monetary policy, which in turn affect the JPY. The BoJ also buys both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The trailing yield on benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important for the JPY. In Japan, the most important of these releases are gross domestic product (GDP), Tankan survey (quarterly survey of business sentiment and expectations), international trade, unemployment figures, industrial production and money supply (M2+CD).

The Japanese yen (JPY) is the official currency of Japan and at the time of writing is the third most traded currency in the world after only the US dollar and the euro. JPY is widely used as a reserve currency and is relied upon by Forex traders as a safe haven currency. Originally introduced in 1871, the JPY has had a long history and has survived many world wars and other events. This was followed by the establishment of the Bank of Japan (BoJ) in 1882 and full control of the JPY by the Japanese government only in 1971. Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ is also committed to a zero-to-near-zero interest rate policy, and the Japanese government has pursued a strong anti-inflationary policy in the past. What factors influence the JPY? Any further changes in monetary policy by the central bank are closely watched by forex traders. In addition, the overnight call rate is the main short-term interbank rate. The BoJ uses the call rate to signal changes in monetary policy, which in turn affect the JPY. The BoJ also buys both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis to inject liquidity into the monetary system. The consistent yield on benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important for the JPY. In Japan, the most important of these releases are gross domestic product (GDP), Tankan survey (quarterly survey of business sentiment and expectations), international trade, unemployment figures, industrial output and money supply (M2+CD).
Read this term rose, USD/JPY fell to around 134.30 while the Nikkei fell (futures trading active with over 4% down, physical closed for lunch break… traders get indigestion while we we are talking)

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