BoJ Frightens the Investors

The Bank of Japan (BOJ) widened the acceptable band for long-term yields to 50 basis points on either side of its 0% target from 25 basis points formerly.

European stock markets crashed to six-week lows, with the German and French benchmark indices dropping by as much as 1%, while London’s FTSE 100 failed as much as 0.8%.

Japanese 10-year government bond yields swelled to their highest after 2014, with eurozone yields following suit. Yields increase when bond prices decline.

The BOJ has steadily purchased billions of dollars worth of government bonds to maintain long-term interest rates low, notwithstanding a pickup in inflation, both at home and abroad.

Pushing Other Currencies Down

Analysts stated that allowing yields to move in a more expansive band could attract fresh cash back to Japan and strengthen the yen.

The policy decision provoked an immediate spike in the yen, with the dollar index falling 0.80% to 103.95, a six-month low.

This knocked other currencies from current gains, with the euro and pound dropping more than 3.5% against the yen.

In turn, the Nikkei benchmark index declined 2.71% after trading in positive territory earlier in the day, while U.S. stock futures dropped between 0.1-0.2%, showing a modestly weaker beginning to trading later.

Meantime, China’s reopening to the rest of the world after almost three years of COVID lockdowns remained a point of concentration for investors.

Credit Suisse on Monday boosted its outlook from neutral to surpass China’s stock markets in the year ahead.