On Friday, the Japanese yen stabilized at 139 per dollar after trading in a broad range between 141 and 138, as the Bank of Japan maintained its ultra-low interest rate policy but tweaked its phrasing to make its yield curve management policy more flexible. During its July meeting, the BOJ maintained its short-term interest rate objective of -0.1% and its 10-year government bond yield target of roughly 0%.
The Fed also maintained advice that allows the 10-year yield to move 0.5% in either direction, but indicated that these would be "references" rather than "rigid limits." That would be the BOJ's first unexpected action since Governor Kazuo Ueda came over, and it is likely to fuel speculation about more policy liberalization. For months, markets have speculated that the last major central bank to maintain a dovish stance may ultimately bow, as persistent inflation and increasing global interest rates put relentless pressure on Japan's bond yields and currency.
The Fed also maintained advice that allows the 10-year yield to move 0.5% in either direction, but indicated that these would be "references" rather than "rigid limits." That would be the BOJ's first unexpected action since Governor Kazuo Ueda came over, and it is likely to fuel speculation about more policy liberalization. For months, markets have speculated that the last major central bank to maintain a dovish stance may ultimately bow, as persistent inflation and increasing global interest rates put relentless pressure on Japan's bond yields and currency.
