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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessMNI INSIGHT (UPDATE): BOJ's Focus On JGB Yields, Yen Can Wait
(Updates with longer-tenor, extended trading time bond buying offer from BOJ)
The Bank of Japan on Wednesday showed its top priority is curbing higher Japanese Government Bond (JGB) yields with concerns over a weaker yen on the backburner as options to act are limited, MNI understands.
The BOJ’s decision reflected that addressing a weaker yen is left to the Ministry of Finance, which has the authority to handle currency issues in Japan, see: MNI MARKET ANALYSIS: USDJPY Continues To Defy Gravity.
A central bank Capital Markets Department official made it clear on Wednesday that yield curve control - a range of -0.25% to +0.25% for the 10-year bond - was the priority.
As well, few lawmakers see the need for the BOJ to unwind easy policy or to raise interest rates to curb a weaker yen, as growth concerns come to the fore.
The end of the fiscal year also brings the possibility of the BOJ issuing a rare statement on maintaining financial market stability with consumer prices expected to rise near 2% in or after April on rising cost-push energy costs, rather than the favoured demand-pull of higher wages.
MARKET DYNAMICS
BOJ officials said upward pressure on U.S. Treasury bond yields as the market ponders potential bigger-than-expected rate hikes by the Federal Reserve has been a top factor on the overall JGB yield curve, leading to a decision this week for unlimited bond buying at a fixed-rate for consecutive days from Tuesday to Thursday, which saw the tempo increase on Wednesday.
The BOJ is also worried about the risk that rising long-end bond yields will increase upward pressure on the benchmark 10-year JGB, making it difficult for the BOJ to keep the 10-year yield around zero percent.
However, the BOJ on Wednesday moved into conducting a fixed-rate bond buying operations regarding longer-end JGBs, see: MNI BRIEF: BOJ Extends JGB Buys, Longer Tenors To Check Yields.
BOJ officials are confident that while fixed-rate bond buying can be effective in curbing the 10-year JGBs, there were earlier concerns that by buying longer-dated JGBs the BOJ could give an unwanted indication of an upper yield limit.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.