BoJ YCC Tweak Strengthens JPY, Weighs On Core Global FI & Equities

The BoJ’s surprise move to widen its YCC tolerance band for 10-Year JGB yields (to -/+50bp) results in JPY strength, pressure for core global FI markets and weakness in global equities (Nikkei 225 futures have shed over 4% on the day). JGB market reaction will be eyed after the return from the lunch break (at the bottom of the hour). The BoJ obviously got to a point where enough was enough, noting that market volatility has heightened in recent months, with a modification in the YCC parameters apparently implemented to improve market functioning (the BoJ now holds over 50% of outstanding JGBs for the first time). As a countermeasure to the potential for a fairly swift challenge of the BoJ’s new YCC settings, it has decided to deploy upsized JGB purchases in Jan-Mar ’23. We will see if that works.