The bears of USD/JPY were caught off guard after the announcement of a policy tweak from the Bank of Japan (BOJ). After the announcement, the USD/JPY initially turned lower, only to rebound and touch 133.60.
The Bank of Japan (BOJ) has announced that its benchmark rate will be at 0.10% with no change. Similarly, the short-term interest rate in Japan is at -0.1%, which is pushing the 10-year bonds (JGB) towards zero. Overall, the Bank of Japan's policy is similar to the expectations of the market and thus should have kept the pair intact.
Bank Of Japan Altered Its YCC
The key surprise for the markets was the alteration of the YCC (Yield Curve Control) by the Bank of Japan. For now, the central bank is expected to further expand the 10-year bond range from its current levels.
Following this news, the Japanese Yen turned bearish and moved the USD/JPY to 132.66, only to rebound back above 133.00.
Through this policy, the central bank of Japan has affected the risk appetite and moved the yields higher. Overall, the end result was the USD witnessing intraday losses.
According to experts, Haruhiko Kuroda is allowing the trades of Yen (JPY) to lick their wounds for now. And all he did was defend the banks lost monetary policy for one more time.
Haruhiko Kuroda also made it clear that they want to reach the inflation target of 2.0%. In fact, they can even go on to further ease the monetary policy if required.
If we look at the US Dollar Index, it remains a little bearish for 2nd day in a row. According to analysts, this has to do with the Fed moving towards a less hawkish policy. In addition, we are receiving hawkish policies from the ECB along with good data from Germany. These 2 factors are also weighing o the US Dollar Index, which means that the USD/JPY has turned mixed.