Report: Bank of Japan expected to end YCC and ETF purchases on March 19th
Japanese media reported that the Bank of Japan will continue to stay in the market to avoid volatility, including continuing to purchase some Japanese government bonds to prevent bond yields from soaring, but the Yield Curve Control (YCC) framework will be abandoned. In terms of risk assets, the Bank of Japan will also end its purchases of Japanese stock ETFs and real estate investment trusts. The USD/JPY exchange rate is expected to decline in the short term
Japanese media reported on Monday that the Bank of Japan is expected to end its yield curve control (YCC) and purchases of risk assets on March 19.
Specifically, the Bank of Japan will continue to stay in the market to avoid volatility, which includes continuing to purchase some Japanese government bonds to prevent bond yields from surging, but the YCC framework will be abandoned. In terms of risk assets, the Bank of Japan will also stop buying Japanese stock ETFs and real estate investment trusts.
Following the release of the above news, the USD/JPY briefly fell to 148.91 during trading before rising back to 149.10.
Last Friday, the same media outlet reported that the most likely plan for the Bank of Japan is to raise the policy rate by more than 0.1 percentage points to guide short-term rates to rise to the 0%-0.1% range. Japan's current policy rate is -0.1%.
The Bank of Japan started a two-day monetary policy meeting from Monday. The Bank of Japan will announce its rate decision on Tuesday, and Bank of Japan Governor Haruhiko Kuroda will hold a monetary policy press conference, which is highly anticipated by the market.
The above report from Japanese media is in line with Goldman Sachs' prediction. Goldman Sachs expects that the Bank of Japan will abandon its negative interest rate policy and exit the yield curve control (YCC) policy on Tuesday.
However, analysts at Nomura Bank stated on Monday that the latest report from Japanese media did not reveal any changes in policy rates, indicating that this may be a risk for April rather than for this meeting.
Last Friday, Japan's largest trade union federation, Rengo, announced that member unions achieved an average wage increase of 5.28% this year, the largest increase since 1991. Japan's fourth-quarter GDP final value was significantly revised upwards, temporarily avoiding a technical recession. Coupled with a significant rebound in inflation rates for the first time in nearly two years, more and more people believe that the Bank of Japan's sustainable 2% inflation target is being achieved