BoJ: Yields may move upward and downward to some extent - Westpac

The Bank of Japan meeting was worth the wait, even if market hawks might have been disappointed by the new forward guidance which implied that policy will remain very loose into the consumption tax hike planned for Oct 2019, according to Sean Callow, Research Analyst at Westpac.

Key Quotes

“Anticipation of policy change had stoked volatility in the policy target 10 year JGB and this has continued since the meeting as markets test the wider trading ranges the BoJ is willing to tolerate.”

“While the 10 year yield is higher for now, this is in the context of the 10yr UST touching 6 week highs. Overall, the net impact of the BoJ’s various policy tweaks looks dovish, consistent with the cut in inflation forecasts.”

“This argues for upside on USD/JPY multi-week. Near term though, risk appetite has been hurt by US-China trade tensions so probes above 112 could be difficult to sustain.”