Few Surprises From The BoJ, JGBS Little Changed

JGB futures are little changed, -9 compared to settlement levels, after the BoJ leaves the policy rate at -0.1% and the 10-year yield target at 0%, as expected. The BoJ also kept the upper bound reference rate on long-term yields at 1%. The vote was 9-0 on the rate decision.

• The decision to keep all policy parameters unchanged is likely to disappoint those advocating for a January 2024 exit from the negative interest rate policy (NIRP). The prospect of the BoJ terminating NIRP without prior adjustments to forward guidance is generally perceived as improbable.
• The explicit easing bias was also maintained, with the BoJ stating that it will ‘patiently continue with monetary easing’. The removal of this easing bias was seen as a necessary step by many market commentators before rate hikes would be considered by the BoJ.
• As highlighted in the MNI BoJ Preview, the BoJ has maintained stimulus efforts due to sluggish GDP growth, including disappointing figures in consumer spending and business investment for the third quarter. Members continued to see high uncertainties around economic activity.
• Full BOJ statement here.
• The market now awaits Governor Ueda’s press conference at 15:30 Japan time today.
• Cash JGBs are dealing little changed after the decision, with pricing slightly mixed. The benchmark 10-year yield is 0.1bp higher on the day at 0.681% versus the morning low of 0.676%.
• The swaps curve is also dealing mixed. Swap spreads mixed.