INSTANT VIEW-BOJ modifies yield curve control, re-defines long-term rate cap

The decision has given the Nikkei a shot in the arm, and a bit of a reprieve from the many headwinds dragging the market lower." MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE "The fact that the USD/JPY has rallied suggests markets were betting on the BOJ abandoning YCC altogether.

The Bank of Japan modified its bond yield control again on Tuesday by re-defining 1.0% as an "upper bound" with room for allowance, rather than a rigid cap. At the conclusion of its two-day policy meeting, the BOJ said it would maintain its target of around 0% for its 10-year government bond under its yield control programme, though changed the language around the 1% yield cap to a "reference" cap.

MARKET REACTION: The yen weakened to around 149.42 per dollar after scaling a nearly two-week high of 148.81 overnight.

The Nikkei 225 share average reversed course to register marginal gains, and was last up 0.17% at 30,749. The 10-year JGB had yet to trade following the announcement, after the yield jumped 6.5 basis points earlier in the day to 0.955%, its highest since May 2013. Benchmark JGB futures remained weak, and were last down 0.50 point at 143.74.

COMMENTS: KYLE RODDA, SENIOR FINANCIAL MARKETS ANALYST AT CAPITAL.COM

"It looks like the BOJ is taking the "softly, softly" approach here. The incrementalism was perhaps a surprise to markets given the speculation of an actual tweak. It still seems to be on the cards, but just not today. The decision has given the Nikkei a shot in the arm, and a bit of a reprieve from the many headwinds dragging the market lower." MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE

"The fact that the USD/JPY has rallied suggests markets were betting on the BOJ abandoning YCC altogether. And to be fair, they may as well given yields were headed for 1% heading into the announcement. But it's also likely the BOJ have their finger on the intervention button to cap any runaway rally on USD/JPY."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)