According to Gate News bot, the Bank of Japan is widely expected to keep the current policy rate unchanged at 0.5% this week. The focus of the market is on whether it will adjust its current plan to gradually taper the pace of Japanese government bond purchases. According to the current policy, the Bank of Japan plans to reduce the size of government bond purchases by 400 billion yen per quarter, and the plan will continue until March 2026. Central Bank Governor Kazuo Ueda previously said that after the end of the yield curve control (YCC) policy, the yield of government bonds should be determined by the market. JPMorgan Chase & Co. expects the BOJ to taper its bond purchases at its current pace until March 2026, and then may slow the tapering to 200 billion yen per quarter and gradually reduce its monthly bond purchases to about 2.1 trillion yen by March 2027, after which it may stop further tapering.

The CITIC Securities Research Report pointed out that the Bank of Japan significantly revised the monetary policy framework at the March monetary policy meeting, ended the negative interest rate and YCC policy, stopped buying ETFs and J-REITs, revoked the commitment to inflation overshoot, and will take short-term interest rates as the primary policy tool in the future, and the meeting decided that the target range of the yen unsecured overnight lending rate is 0% ~ 0.1%. The Bank of Japan (BOJ) is fully aware of the inflation outlook, and the withdrawal of easing policy has not caused panic in the market. We believe that there is a possibility of further increases in the Bank of Japan's policy rate after this meeting, and the short-term target rate may reach about 0.5% by the end of the year, and there is room for the US-Japan interest rate differential to narrow further, but the probability of a sharp reversal in the yen carry trade during the year may be small.

Bank of America rates strategists said that a possible end to yield curve control (YCC) by the Bank of Japan would have only a limited impact on investors' interest in U.S. Treasuries. Although Bank of America's Japan team expects the BOJ to cancel the YCC at the end of Tuesday's meeting, Bank of America's Meghan Swiber and Anna Caiyi Zhang wrote in a note that "foreign purchases of Japanese investment are likely to be dominated by expected duration returns versus spread gains, which are unlikely to be affected by the cancellation of the YCC." One risk, strategists said, is a reduction in the BOJ's purchases of U.S. Treasuries, which could reflect a more directional positioning, however, "it could be related to a shift in the Fed's or U.S. growth/inflation outlook." ”

Bank of America (BofA) rates strategists noted that the end of the Bank of Japan's yield curve control (YCC) had a limited impact on interest in buying US bonds. The BofA Japan team expects the Bank of Japan to decide to end YCC at its policy meeting on the 19th, but this is "unlikely to have a meaningful impact on demand for U.S. Treasury bonds."

Brian Daingerfield, market analyst at NatWest, said in a report that the wage increase demanded by Rengo, Japan's largest trade union, is enough to justify a possible rate hike by the Bank of Japan on Tuesday and end yield curve control (YCC). However, Daingerfield said the rate hike is likely to be accompanied by a cautious statement.

Analysts at Mitsubishi UFJ said that even if the Bank of Japan ends its negative interest rate policy and yield curve control (YCC), tomorrow's meeting of the Bank of Japan may not be a decisive turning point to boost the yen. "The Bank of Japan will have to release more confidence that further tightening is needed to trigger a stronger yen," they said in the report. "MUFG currently expects the Bank of Japan to raise interest rates only once more in the fourth quarter of this year. USD/JPY is expected to fall against the Japanese yen in the second half of the year, but this will also require the Fed to cut interest rates closer to 4.00%.

Bank of America postponed its base case forecast for the Central Bank's removal of negative Intrerest Rate and yield curve control (YCC) from January previously. Economists Izumi Devalier and Takayasu Kudo wrote in the report: "Even so, the acceleration of underlying inflation in Japan is likely to continue, and monetary policy is moving in the direction of 'gradual normalization'." Base salary growth in FY2024 is also likely to improve further. "Bank of America still believes that after the cancellation of negative Intrerest Rate and YCC, the Japanese Central Bank will raise interest rates by 25 basis points between October and December this year and between April and June next year, bringing the policy Intrerest Rate to 0.5% by mid-2025.

UBS's assessment of the BOJ's policy meeting and lack of change was correct, with UBS analysts saying it would be unwise to expect the BOJ's actions too far ahead. The Bank of Japan cleverly kept policy unchanged on Tuesday. However, in the first quarter of 2024, the central bank's yield curve control (YCC) policy may change, but only if higher wage growth is achieved to support this move.

Analyst Taro Kimura said 2024 would mark the end of the Bank of Japan's yield curve control (YCC), but don't expect it to turn hawkish.

(1) Bank of Japan Governor Kazuo Ueda said in response to a question in the Diet on Friday that while the weakness of the yen has raised import prices and magnified the negative impact on the economy, it has also helped boost exports, including inbound spending, and boosted the profits of global companies. Kazuo Ueda said: It is difficult to say that the current weak yen is not good for the economy; (2) BOJ watchers are keeping a close eye on the yen, especially as Kazuo Ueda admitted that the BOJ took into account exchange rate fluctuations before adjusting its yield curve control (YCC) program in July. However, by taking a neutral stance on the current state of the yen, Ueda seems to be hinting that there is still room for further stimulus measures. Despite accusations from Japanese MPs that monetary easing triggered a depreciation of the yen and exacerbated the impact of inflation on households, Ueda stuck to his position that the BOJ will maintain ultra-loose policy until the inflation target is achieved; (3) Shortly after Kazuo Ueda's speech, the yen traded at around 150.50 against the dollar, close to the key level of 151.95 reached in 1990. The Japanese yen fell the most against the dollar this year, as investors remained focused on the interest rate differential between Japan and the United States. The Bank of Japan is sticking to a negative interest rate policy, while the Fed is seen as on a path of "higher and longer" interest rates. However, Kazuo Ueda did not take the same position as his predecessor, Haruhiko Kuroda. Haruhiko Kuroda often says that the depreciation of the yen is good for the economy as a whole, thereby accelerating the momentum of the yen's depreciation, and seems to be supporting the depreciation of the yen. And Kazuo Ueda has never said such a thing since taking the helm of the Bank of Japan in April

Hideo Hayakawa, former chief economist at the Bank of Japan, said the Bank of Japan is expected to end its negative interest rate policy in April and continue to raise short-term borrowing costs next year as the outlook for continued wage growth becomes clearer. The Bank of Japan adjusted its yield curve control (YCC) policy in October, allowing long-term interest rates to rise further, although retaining its target of 0% yield on 10-year bonds. Hayakawa argues that the central bank "effectively dismantled" the framework in October, redefining the strict cap on yields as an accommodative reference. He said that next, the Bank of Japan may raise short-term interest rates from -0.1% to around zero in April, and the central bank is just waiting for more evidence that inflation will continue to reach 2%. Once this is achieved, negative interest rates will end. In addition, he believes that after exiting negative interest rates, short-term interest rates may need to continue to be raised at a rate of about once a quarter next year.

(1) Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank does not necessarily need to wait until inflation-adjusted wages turn positive to end its ultra-loose monetary policy. (2) "By the time the positive wage-inflation cycle begins, real wages are likely to have turned positive," Ueda said, "but in terms of how long we'll keep massive monetary easing going... Real wages don't have to turn positive before that decision is made." (3) Ueda told the Diet, "If we can foresee with some certainty that real wages will turn positive in the future, we can make a decision [to end ultra-easing]." Ueda said that the pass-through effect of higher import prices must fade, and wages and inflation must rise in tandem before the Bank of Japan can consider withdrawing from its ultra-loose policy. (4) Analysts expect Japan's inflation-adjusted real wages to continue to decline next year as wage increases cannot keep pace with continued price increases. (5) At present, the Bank of Japan has set a target of 0% for 10-year Japanese bonds and a short-term interest rate at -0.1% in accordance with the yield curve control (YCC) policy to revive economic growth and continue to achieve the 2% inflation target. (6) Ueda once again stressed that the Bank of Japan is determined to maintain ultra-loose policy until the recent cost-push inflation turns into more price increases driven by strong domestic demand and rising wages. Ueda said, "Looking at the trend inflation rate, we are still some way from our 2% target. That's why we continue to implement massive monetary easing. ”

Traders rushed back to short the yen, prompting a pushback from the Japanese authorities, who again threatened action, including possible intervention in the currency market. The yen edged off this year's lows after Vice Finance Minister Mato Kanda said on Wednesday that it was ready to act if necessary. Mato Kanda said, "We are always on call. "This is exactly what he said when Japan intervened in the foreign exchange market a year ago." But I can't say what we're going to do, when we're going to do it, we're going to make general judgments, we're making judgments in an emergency. "The yen posted its biggest one-day drop since April on Tuesday when the Bank of Japan adjusted its yield curve control (YCC), suggesting that any move away from ultra-loose policy would be slow and gradual.

ING said the BOJ gave the impression that it was wary of a surge in government yields, which is why it was so cautious. However, the change in inflation forecasts is not enough to support the view that it will exit the YCC policy. The CPI, which excludes food (i.e., the BOJ's target), is still expected to be 1.7% in FY2025 and will not steadily exceed 2.0%. ING believes that today may also see data on foreign exchange intervention in Japan for October, but these data have not yet been released. Overall, today's BOJ speech did not lead to a reset of their view on the yen, and now the risk is that USD/JPY rises to 152 against the Japanese yen and prompts the authorities to take aggressive FX interventions.

The policy measures taken by the Bank of Japan today, while significant, are not enough. The yen has not rebounded yet, which means that the overall rally in the US dollar has not yet ended. The three main priorities of today's BOJ meeting are: ending daily fixed-rate bond purchases, a sign that these operations are becoming futile in the face of surging global yields; Using the 10-year Treasury yield cap of 1% as a reference, this means that YCC no longer exists and is a necessary precursor to ending negative interest rates; Raise the inflation forecast for FY2024 from 1.9% to 2.8%, without which any expectation of ending the YCC will not materialize. After the decision was announced, the yen slid and still lacked momentum to rebound. The yen will eventually rebound, but not anytime soon. Traders believe that there has not yet been a substantial tightening of financial conditions in the United States, which is why the dollar will continue to find support.

Christopher Wong, OCBC Singapore FX Strategist: The Bank of Japan no longer has a strict cap of 1%, which means they will allow Japanese government bond yields to rise above 1%. In a way, it's as good as letting YCC fade into the background. USDJPY's reaction reflects disappointment with the Bank of Japan's lackluster correction. It may only be a matter of time before the Bank of Japan exits its negative interest rate regime, as inflationary pressures have been quite persistent so far this year. Market sentiment is improving, and upward pressure on wage growth remains.

Noriatsu Tanji, chief bond strategist at Mizuho Securities, said the BOJ's decision to raise the long-term yield cap in its yield curve control (YCC) program to 1% "effectively removed the cap," meaning "YCC becomes a skeleton." He said this meant that the YCC framework would continue to exist, the government would continue to buy government bonds, and the impact of the adjustment on the market would be "minimal". Yields, which are currently rising, will return.

(1) USD/JPY rose slightly in Asia on Tuesday and is currently trading around 149.36, recovering some of its losses overnight, with the pair briefly updating a two-week low to 148.80. Traders are awaiting a policy decision from the Bank of Japan, which is likely to raise inflation expectations and consider adjusting its bond yield control policy. (2) The Bank of Japan has set a 10-year yield target of around 0% under the YCC policy. In July, the BOJ raised the real cap on yields from 0.5% to 1.0% amid criticism that the BOJ's tight adherence to the cap distorted the market and led to a depreciation of the yen. (3) On Tuesday, the yield on 10-year Japanese government bonds jumped 6.5 basis points to 0.955%, hitting a new high since May. (4) Nicholas Chia, macro strategist at Standard Chartered, said: "The market seems to think that the cap will be raised by another 50 basis points, but I think that another doubling of the cap (i.e. to 2%) amounts to a de facto underestimation of the possibility of removing the cap." Nonetheless, the performance of the FX market suggests that any move at YCC today is likely to limit rather than reverse the weakness of the yen"

(1) Japanese government bond yields climbed to new highs on Monday as investors reacted to Friday's rise in U.S. Treasury yields and weighed the possibility that the Bank of Japan could adjust its monetary policy decision. Data showed that the 10-year Japanese government bond yield rose 2 basis points to 0.89% at one point the day before the Bank of Japan announced its monetary policy decision on Tuesday, hitting a new high in more than a decade; (2) Japanese government bond yields have been pushed to new highs in recent weeks due to rising US Treasury yields and market speculation that the Bank of Japan may adjust its yield curve control (YCC) policy. After the central bank adjusted its YCC policy at its July meeting, the current real cap on 10-year Treasury bonds allows its yield to rise up to 1.0%; (3) Despite mounting pressures, the Bank of Japan is widely expected to continue to keep its short-term interest rate target at -0.1%, while the long-term interest rate target set under the YCC policy will remain around 0%. Meanwhile, Shoki Omori, chief Japan strategist at Mizuho Securities, said the auction results for the 2-year JGB were "mixed" and investors had already bought the bonds ahead of the auction. This caused the 2-year JGB yield to edge up to 0.095% before the auction, the highest level since January 2014;

Traders have realized that the Fed's high interest rates will persist for some time, while the U.S. Treasury is expected to issue more bonds to finance the U.S. government's large budget deficit, which has exacerbated the trend in U.S. Treasuries, writing an article. This external pressure raises the likelihood of the BOJ's disorderly exit from the yield curve control (YCC) program and will increase the risk of financial accidents and headwinds to global growth. Therefore, accelerating the exit from the YCC is in the best interest of Japan and the rest of the world. This should begin as early as this week when the Bank of Japan reviews its monetary policy stance, and continuing to maintain the current overly cautious approach could pose greater risks.

On October 30, Moody's said in its weekly Asia-Pacific Economic Outlook that the Bank of Japan expects to keep interest rates unchanged when it concludes its two-day policy meeting on Tuesday, but may raise its inflation and real GDP growth forecasts for the fiscal year ending March 2024. The BOJ is likely to fine-tune the approach to yield curve control, possibly removing the 0.5% yield soft range ±, or removing the language surrounding the statement. The agency said the BOJ may abandon yield curve control (YCC) or negative interest rate policies at future policy meetings, adding that further depreciation of the yen could accelerate the move. In terms of timing, the Bank of Japan is most likely to make policy adjustments at its April 2024 meeting.

Bank of America securities analysts said the Bank of Japan could raise the upper limit of its yield curve control to 1.5 percent from the current 1 percent at next week's monetary policy meeting. Analysts including Izumi Devalier and Shusuke Yamada said it was necessary for the Bank of Japan to adjust its YCC policy as it tries to curb rising yields and a weaker yen, Japan's balance sheet could accelerate expansion again. His previous base forecast was that Japan would end its negative interest rate policy (NIRP) in January 2024 and revise yield curve control (YCC).

(1) The Bank of Japan intervened in the Japanese government bond market for the fifth time this month on Friday, after the 10-year yield rose to a new 10-year high as the Bank of Japan battled market forces against the backdrop of soaring U.S. Treasury yields. (2) Japan's 10-year yields started today by climbing to a high of 0.845% since July 2013, having also touched them the previous day. (3) But yields retreated immediately after the Bank of Japan's announcement, the latest 0.83%, 1.0 basis points below Thursday's close. (4) Under the Yield Curve Control (YCC) policy, the Bank of Japan set the upper limit on the yield of 10-year government bonds at 1%, and unexpectedly doubled the upper limit at the end of July. However, the Bank of Japan has signaled that it will not tolerate a sharp rise in yields to the ceiling, and has repeatedly intervened to prevent it. (5) "The Bank of Japan is not trying to place a limit on yields here. The signal is that it should be gradual rather than rushed," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management, "I don't know if the BOJ is happy with this level, but 0.845% is still well below 1%. There is still room for upside. ” (6) The Bank of Japan provided five-year mortgages to financial institutions in this latest operation, the second time this month to use this instrument. Another regular option for central banks is additional bond purchases, which have been done three times this month, including earlier this week.

Naomi Mugurum, chief fixed income strategist at MUFG Morgan Stanley, revised her main assumption for the Bank of Japan's monetary policy, predicting the elimination of YCC and negative interest rates at the January 2024 meeting. The main reason for the revision is that the Bank of Japan is increasingly confident in its ability to achieve a "positive income-expenditure cycle" and a "wage-price virtuous cycle". Muguruma took into account the view already expressed by members of the Bank of Japan's policy committee that the sustainability of wage growth can be judged before the results of the collective bargains are revealed next spring. Even if the Bank of Japan has enough information and data to make a decision, it will not force a decision to cancel the negative interest rate policy at its January meeting if long-term interest rates are unstable.

Pimco said the Bank of Japan could scrap its yield curve control (YCC) program by the end of the year if price increases prove stickier than expected. "If the data shows that inflation can sustainably exceed the Bank of Japan's current forecast (as we expect), the Bank of Japan may cancel the YCC late this year or early next year," Pimco global economic adviser Richard Clarida said in a note. He said the Bank of Japan may also raise short-term policy rates to 0% early next year.

Masayuki Koguchi, general manager of the fixed-income investment department of Mitsubishi UFJ Financial Group, said that the Bank of Japan’s announcement of additional purchases of Japanese government bonds may accelerate the depreciation of the yen. Koguchi said that with long-term yields approaching 1%, the Bank of Japan wants to avoid triggering another attack on yield curve control (YCC). Taking into account the possibility of further accelerating depreciation of the yen, the Bank of Japan will not be able to continue these temporary operations, and continued large-scale bond purchases in current regular operations itself carry the risk of accelerating the depreciation of the yen. The yen is close to its lowest level this year against the U.S. dollar at around 149.75.

The minutes of the July policy meeting released today showed that members of the Bank of Japan’s Monetary Policy Committee believed it was necessary to increase the flexibility of the yield curve control (YCC) program to respond flexibly to upside and downside risks, while a stable market environment enabled them to take action. Many members said the central bank has not yet achieved its inflation target. One member said the inflation target seems to be clearly visible, and it may be possible to assess whether the central bank has achieved the target around January to March 2024. Some members said there is a high possibility that companies will continue to raise wages next year. Some members noted that it was important to clearly explain that the YCC adjustment was not a step toward exiting easing.

September 22 news, ING said that based on the Bank of Japan’s statement and the wording of Ueda Kazuo’s press conference, the Bank of Japan still believes that higher-than-expected inflation is temporary and is driven more by cost-push factors. Japan has not yet We are in a position to sustainably achieve our inflation target. However, we believe the Bank of Japan may adjust its policy again in October and make its first attempt to raise interest rates in the second quarter of next year. We believe consumer prices are likely to remain above the BOJ's forecast and more pronounced demand pressures will emerge in the coming months, allowing the BOJ to at least change its YCC policy. In terms of raising interest rates, the Bank of Japan is likely to wait until there are signs of sustained and steady wage growth, so it may raise interest rates in the second quarter of next year.

Citi said the possibility of the Bank of Japan ending its negative interest rate policy soon is not as high as the market thinks, but the removal of yield curve control (YCC) and negative interest rates early next year is a possible "early risk" scenario. .

Hayuri Shirai, a former BOJ board member, said it was too early for the BOJ to tighten monetary policy, and she expressed surprise at the central bank's move in July to allow long-term interest rates to rise further, a move seen by markets as an exit from its massive stimulus program Another step. Hayuri Shirai said the recent rise in inflation was largely driven by rising import costs rather than wages, echoing the views of Toyoaki Nakamura, a moderate BOJ member. Shirai expects the BOJ may also fine-tune its yield curve control (YCC) target again to plus or minus 1 percent from the current plus or minus 0.5 percent before it starts to unwind its loose monetary policy. Shirai added that the pressure on the government to intervene to prevent the yen from depreciating has eased due to lower commodity prices and higher stock markets.

Analysts at Rabobank said the message contained in the BOJ's July policy change was not easy to interpret. The BOJ may have been trying to give itself more flexibility on the YCC issue. However, the bank's Governor Kazuo Ueda's comments on the currency may have encouraged speculation that a weaker yen will lead to further rises in 10-year yields. Recent weaker-than-expected Japanese economic data supports the view that the Bank of Japan will maintain its loose policy settings, so Rabobank raised its forecast for USD/JPY. “We have lowered our forecast for the yen. We now see USD/JPY around 145 in 3 months, back to 140 in 9 months and 135 in 12 months, considering The Fed will adopt a more accommodative policy."

① A summary of the Bank of Japan's July policy meeting, released on Monday, showed that the central bank discussed the growing outlook for sustained inflation at the meeting, with one member saying wages and prices could continue to rise at an "unprecedented pace." ② While members emphasized the need to maintain ultra-loose monetary policy, optimism about the outlook for inflation suggested they were now more confident that conditions may be in place for a gradual exit from stimulus. ③ An opinion in the summary of the meeting shows that "more companies are beginning to consider raising wages in the next fiscal year and beyond. Japan is expected to usher in a new phase of continuous wage and service price increases. The recent wage increases and corporate pass-through costs are due to There is a backlog effect because these moves have been pent up for almost 30 years. As a result, wages and sales prices are likely to continue to rise at unprecedented rates." ④ The Bank of Japan kept the yield curve control (YCC) target unchanged at its July meeting, but took steps to allow long-term interest rates to rise more flexibly with inflation and economic growth. ⑤ Kazuo Ueda, Governor of the Bank of Japan, said that this decision is a precautionary measure taken in response to rising inflation pushing up long-term bond yields and exacerbating the risk of financial market volatility. ⑥According to the summary, several members said that due to the high degree of uncertainty in the outlook and the fact that inflation faces "both upside and downside risks" at the same time, it is appropriate to increase the YCC's flexibility at this stage.

Moh Siong Sim, an FX strategist at Bank of Singapore, said the off-plan bond-buying operation indicated that the Bank of Japan intends to control the rise in Japanese government bond yields. "Against the backdrop of rising U.S. Treasury yields, this could limit near-term USD/JPY downside prospects. In the bigger picture, the BOJ's decision to ease the YCC has allowed long-term yields to move higher amid improving fundamentals , which is a positive for the yen in the medium term."

Japanese government bonds remained under downward pressure on Thursday as investors tried to gauge how much the Bank of Japan would allow yields to rise under control of a more flexible yield curve. Benchmark 10-year government bond yields extended gains, rising 2.5 basis points to 0.65%, a nine-year high, while the Bank of Japan refrained from unplanned bond purchases early in the day. Traders will remain on the lookout for unplanned moves that could occur at any time after the Bank of Japan unexpectedly intervened in markets on Monday. "Traders are trying to test how much upside there is as the BOJ's stance remains unclear after deciding to allow more flexibility in implementing the YCC," said Kazuhiko Sano, chief strategist at Tokai Tokyo Securities Co.

The yield on Japan's 10-year government bond rose above 0.6% on Wednesday, hitting a new high in more than nine years. Last Friday, the Bank of Japan made subtle adjustments to the benchmark government bond yield target limit range, decided to carry out yield curve control YCC "with greater flexibility", and raised the fixed interest rate for purchasing Japanese government bonds from 0.5% to 1%. Treasury yields rose in response to the announcement of the decision.

The minutes of the meeting showed that the BOJ board had held heated discussions in June on the possibility of adjusting the yield curve control. Although the nine-member committee ultimately decided to keep the policy unchanged in June, they exchanged views on the possibility of adjusting the YCC and what to watch out for when doing so. It was a prelude to the Bank of Japan's decision on Friday to loosen yield controls, theoretically allowing 10-year yields to rise to 1%, above a previously announced cap of 0.5%. The minutes showed that the debate over the YCC was more intense than Kazuo Ueda indicated at a news conference after the June meeting, and the discrepancy between his remarks at the time and the minutes reinforced a view in the market that it would be difficult for the Bank of Japan to Hint any possibility of changing YCC before acting. Ultimately, the committee agreed that no adjustments to the YCC were necessary in June given the smoother bond yield curve and improved market functioning.

Barings Japan said the BOJ's adjustment to the yield curve is an attempt by policymakers to prevent further yen weakness while curbing a strong yen appreciation. "The unspoken message of this policy change is that the BOJ and the MOF are not happy when the dollar-yen exchange rate is above 140," said Manabu Tamaru, head of investment and executive officer at the asset manager. "However, an adjustment with the Fed maintaining its tightening stance means that "the yen will not appreciate excessively," and after this adjustment, policymakers' only tool to support a weaker yen will be rate hikes. According to the firm's model, Japan's 10-year government bond yield will peak between 0.70-0.85% in the next 12 to 18 months.

Strategists at Morgan Stanley and Goldman Sachs Group Inc. believe the Bank of Japan's move to adjust its yield curve control (YCC) will provide support for further gains in Japanese stocks. After the Bank of Japan adjusted rates on Friday to allow yields on 10-year government bonds as high as 1%, Morgan Stanley strategists wrote that the opportunity "is now clearer" and that the Bank of Japan "successfully increased its policy flexibility, without signaling a tightening cycle." Goldman Sachs strategists said that with the threat from the Bank of Japan appearing to have dissipated, investors are likely to broaden their interest in various sectors while selectively adding weight to large-cap stocks. “The stabilization of the yen and the strengthening momentum of corporate governance reforms may encourage more foreign investors to flow into Japanese equities,” they wrote.

In the past week, the financial market was extremely busy. The central banks of the United States, Europe, and Japan all released important information, and the U.S. dollar, euro, and yen fluctuated violently. Although the Fed is close to the end of the interest rate hike cycle, interest rates may remain high for a long time, and the strength of the economy exceeds the expectations of all Wall Street institutions. The US dollar index hits 102; The /USD fell back to 1.1; the Bank of Japan, which was exposed to tighten monetary policy earlier, issued a policy statement last Friday that was less than expected. It adjusted the yield curve control (YCC) policy and will flexibly control the 10-year yield. YCC to mitigate the impact on the functioning of the bond market. However, the negative interest rate policy (basic interest rate -0.1%) has not changed, and the 10-year Japanese government bond yield target has been maintained at around 0, and USD/JPY hit 140 again. The consensus predicts that the U.S. dollar will hardly fall sharply in the short term, and Goldman Sachs has reduced the probability of U.S. recession to 20%. The renminbi rebounded to around 7.15 against the U.S. dollar, but in the current global context, the renminbi is more likely to tend to fluctuate in a range in the third quarter.

China Galaxy Research Report pointed out that although the Bank of Japan’s adjustment of the advanced YCC policy was earlier than market expectations, investors were slightly surprised, but we believe that the Bank of Japan’s adjustment of the YCC policy will have a relatively short-term impact on Japanese and global markets and related asset pricing. limited. On the one hand, the Bank of Japan has been implementing the ultra-loose monetary policy and upgrading to the YCC policy for a long time, and the exit requires a slow process; on the other hand, global investors also need time to observe and evaluate the impact of Japan’s YCC policy adjustment. To provide a basis for the adjustment of the next investment strategy. However, in the future, the Japanese stock market may face the pressure of capital outflow in the short term, and the previous rise will come to an end or even a wave of adjustments will occur. The Bank of Japan's earlier-than-expected adjustment to YCC policy may cause investors to reassess the inflation outlook globally and across advanced economies. Japan, which has been plagued by low inflation and even deflation for a long time, is beginning to face inflationary pressure and gradually withdraw from its ultra-loose policy, which means that the central bank needs to re-examine and evaluate the 2% inflation target set during the long-term low inflation period in the past .

The Bank of Japan announced on Friday (July 28) that its bond yield control (YCC) policy will be eased and allow interest rates to rise above a certain level. Investors interpreted the move as the first step in withdrawing extraordinary stimulus measures, and Japanese government bond prices plunged. Mark Dowding, one of the strongest bears on Japanese bonds, said the current JGB selloff is only just getting started and expects benchmark JGB yields to eventually rise to 1.25%. As head of investments at RBC BlueBay Asset Management, Dowding has been adamant that Japan will have to abandon its ultra-loose monetary policy, and his bearish stance on the yen is finally paying off .