BoJ maintains key monetary policy settings with rates at -0.10% and 10yr JGB yield target at 0% with a +/-50bps range, but will guide YCC more flexibly with fixed rate operations for 10yr JGB at 1.0% (prev. 50bps)

Says:

• Decision was made by 8-1 vote with Nakamura the dissenter on YCC.


• Appropriate to heighten the sustainability of monetary easing.


• Will operate yield curve control more flexibly to respond nimbly to upside and downside risks.


• Uncertainty over Japan's economy and prices is extremely high.


• Japan's consumer inflation is higher than projected in the April outlook.


• To conduct fixed rate unlimited buying for 10yr JGBs for a second time today.


• Widens the range of 5yr-10yr JGB purchases to JPY 900bln from JPY 875bln.


• Widens the range of 3yr-5yr JGB purchases to JPY 750bln from JPY 725bln.

Outlook Report Forecasts:

Real GDP

• Fiscal 2023 median forecast cut to 1.3% from 1.4%.


• Fiscal 2024 median forecast maintained at 1.2%.


• Fiscal 2025 median forecast maintained at 1.0%.

Core CPI

• Fiscal 2023 median forecast raised to 2.5% from 1.8%.


• Fiscal 2024 median forecast cut to 1.9% from 2.0%.


• Fiscal 2025 median forecast maintained at 1.6%.

Reaction details (04:44)

• USD/JPY was choppy amid the initial confusion from the BoJ before but is ultimately about 30 pips higher from pre-announcement levels around 15 mins after the announcement.


• Update: USD/JPY has pared all earlier gains and is now down by 0.6% on the session with yen strength coinciding with the upside in yields.

Analysis details (05:00)

• BoJ kept its policy settings unchanged as expected with the Bank Rate kept at -0.10% and YCC parameters maintained to target 10yr JGB yields at around 0%, but noted it will guide YCC more flexibly with its daily fixed-rate purchases of 10yr JGBs at a rate of 1.0% (prev. 0.5%) and it also increased the amount of purchases to JPY 900bln from JPY 875bln. The announcement resulted in plenty of confusion although JPY ultimately weakened with the move less hawkish than what a recent Nikkei report had suggested, while the Outlook Report saw an upgrade to FY23 Core CPI forecast to above the BoJ's target but the FY24 Core CPI view was downgraded and FY23 GDP projection was also lowered.

28 Jul 2023 - 04:30- Fixed IncomeData- Source: Newswires