Despite the assumption among market participants and observers that no surprises were likely to come from the Bank of Japan until Gov. Haruhiko Kuroda¡¯s term ends next spring, the central bank dropped a bombshell Tuesday by tweaking its ultraloose monetary policy.
After its two-day policy meeting, the BOJ announced a modification to its so-called yield curve control, a policy of purchasing unlimited amounts of 10-year government bonds to control JGB yields at around 0%. The BOJ will now allow long-term yields to fluctuate plus and minus 50 basis points, doubling from the previous 25-basis-point range, which is effectively seen as a rate hike. It maintained a short-term interest rate at minus 0.1%.
So after months of the status quo, what prompted the central bank to pivot?
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