BOJ Opens 'Pandora's Box' for Traders on Alert for Another Shock
Comment of the Day

January 16 2023

Commentary by Eoin Treacy

BOJ Opens 'Pandora's Box' for Traders on Alert for Another Shock

This article from Bloomberg may be of interest to subscribers. Here is a section:  

Investors are on high alert for further policy tweaks from the Bank of Japan this week after December’s shock decision to raise the bar on yield movements failed to significantly improve market liquidity.

While almost all economists surveyed by Bloomberg expect no change at the two-day meeting finishing Wednesday as their main scenario, market pressure on the central bank’s stimulus framework has intensified since last month’s efforts to ease the side effects of policy.

Another increase in the ceiling for the 10-year yield is seen as the most likely course of action, should the BOJ act, given its recent emphasis on improving bond-market functioning. 

Eoin Treacy's view

10-year JGB yields are above the 50 basis point cap suggesting investors are willing to bet the BoJ will raise the rate at which they are willing to intervene.

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