With the Fed aggressively raising rates and other countries following suit, pressure is on the bank of Japan, with markets betting it will have to expand or abandon its yield curve control band today.
The Nikkei 225 opened 1.7 percent lower and the Topix 1.6 percent lower.Yields on 10-year JGBS rose to 0.265 per cent, their highest since January 2016.Today, the Bank of Japan will announce its interest rate decision.According to statistics, the average time for the boj to issue resolution statements in the last six years is 11:04 Beijing time.
The Bank of Japan is widely expected to keep policy loose when it meets on June 17, but Japanese short sellers are waiting for the boj to tighten monetary policy.According to media reports, a growing number of traders are betting that the boj will surprise the market at its meeting on Friday.
The boj has been capping government bond yields since 2016 in a policy known as yield Curve Control (YCC).The boj has been vigorously defending the YCC ceiling in recent days, but the pressure has spread to the boj after the Fed raised interest rates by 75 basis points on Wednesday, with markets watching to see how the boj will adjust its policy stance, or if it will adjust the YCC ceiling, following the Fed’s biggest rate hike in 28 years.
JGB 10-year yields are expected to move higher above the central bank’s comfort zone ahead of the decision, analysts said.
Adam Cole, chief currency strategist at RBC Capital Markets, said in a note that there is a growing consensus that the boj has no choice but to widen or abandon the yield curve band, possibly as early as Friday.