The Bank of Japan surprises by expanding the fluctuation range for the 10-year bond

MADRID, 20 Dic.

The Bank of Japan surprises by expanding the fluctuation range for the 10-year bond


The Bank of Japan (BoJ), the only major central bank that had not yet changed its monetary policy stance, has surprised the markets by widening the fluctuation range accepted for the Japanese 10-year bond price in its yield curve control strategy, which has unleashed volatility in the stock markets and debt and currency markets.

The institution chaired by Haruhiko Kuroda has decided to keep the country's interest rates unchanged at -0.1%, the same rate it has been maintaining since January 2016, when it entered negative territory for the first time in its history.

However, the Bank of Japan has announced an unexpected adjustment in the accepted range of the Japanese 10-year bond price from around /-0.25 percentage points to around /-0.5 percentage points.

In a statement, the entity has justified its decision on the need to facilitate the transmission of the effects of monetary relaxation generated within the framework of the yield curve control strategy.

Likewise, regarding the risks for the macroeconomic perspectives, the Bank of Japan has underlined the persistence of "extremely high" uncertainties derived from the evolution of economic activity and prices abroad; the situation in Ukraine and the prices of raw materials, as well as the course of Covid-10 in Japan and abroad.

In this situation, he has defended the importance of paying due attention to developments in financial and currency markets and their impact on economic activity and prices in Japan.

The decision of the Bank of Japan has caused a fall of 2.46% in the Tokyo Stock Exchange, while boosting the price of the yen against the dollar, which weakened 3.3% against the Japanese currency when exchanged for 132 .29 yen from 136.88 yen at Monday's close.

"The Bank of Japan today widened the tolerance band around its yield target, but we don't expect it to raise rates anytime soon," said Marcel Thieliant, an economist at Capital Economics, for whom there is nothing in the Bank of Japan's statement. Japan to suggest that this decision heralds a complete tightening of monetary policy.

In this sense, the expert stressed that the entity has reiterated that it expects short- and long-term policy rates to remain at their current levels or lower.