Free Trial
WHITE HOUSE

WH Press Conference Due To Begin Shortly

PIPELINE

CSX 3Pt Issuance Extends to 46Y

EURGBP TECHS

Bearish Focus

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

BOJ Action Would Roil Global Stocks, Steepen Curves

GLOBAL MARKET/OPINION

Per our Insight piece out earlier today: the Bank of Japan could adjust its easy monetary policy around the autumn if the yen stabilises at a lower level around 140 to the dollar, sending inflation to temporary peaks near 3% and driving wage hikes into 2023, MNI understands. That could involve adjusting yield curve control (currently the defended yield ceiling on 10Y JGBs is 0.25%).

  • While our reporting points to a BOJ policy move further down the line (as our Insight headline suggests, only in autumn) and not immediately, we've had client questions about implications of potential hawkish BOJ policy shifts.
  • In the case of unexpected intervention, or adjusting YCC, expect a big knee jerk move lower in the USD vs the yen (first key support comes in at 132.70/131.50 currently, vs 136.22 spot).
  • Japanese stocks would sell off strongly, with global equities moving lower on the follow.
  • Despite a risk-off move, global long-end yields would rise, with potential for bear steepening in tandem with JGBs. Even if the JGB employs just FX intervention and not YCC adjustment, there would be increasing speculation that the latter would be approaching.
  • Likewise oil/industrial metal commodities would weaken as a negative growth impact would be anticipated (though a softer USD could mitigate some of the downside).
  • Emerging Market assets would sell off sharply, in part because of the above global impact, and also because the yen is seen as a carry trade funder.
  • The overall impact of an FX intervention would be sizeable for a short period of time but might not last, as unilateral interventions in the yen historically haven't worked for long. Abandoning YCC would have more lasting impact.

Source: BBG, MNI

288 words

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.

Per our Insight piece out earlier today: the Bank of Japan could adjust its easy monetary policy around the autumn if the yen stabilises at a lower level around 140 to the dollar, sending inflation to temporary peaks near 3% and driving wage hikes into 2023, MNI understands. That could involve adjusting yield curve control (currently the defended yield ceiling on 10Y JGBs is 0.25%).

  • While our reporting points to a BOJ policy move further down the line (as our Insight headline suggests, only in autumn) and not immediately, we've had client questions about implications of potential hawkish BOJ policy shifts.
  • In the case of unexpected intervention, or adjusting YCC, expect a big knee jerk move lower in the USD vs the yen (first key support comes in at 132.70/131.50 currently, vs 136.22 spot).
  • Japanese stocks would sell off strongly, with global equities moving lower on the follow.
  • Despite a risk-off move, global long-end yields would rise, with potential for bear steepening in tandem with JGBs. Even if the JGB employs just FX intervention and not YCC adjustment, there would be increasing speculation that the latter would be approaching.
  • Likewise oil/industrial metal commodities would weaken as a negative growth impact would be anticipated (though a softer USD could mitigate some of the downside).
  • Emerging Market assets would sell off sharply, in part because of the above global impact, and also because the yen is seen as a carry trade funder.
  • The overall impact of an FX intervention would be sizeable for a short period of time but might not last, as unilateral interventions in the yen historically haven't worked for long. Abandoning YCC would have more lasting impact.

Source: BBG, MNI