Nikkei 225 falls more than 2% after Bank of Japan expands yield target, yen strengthens

Bank of Japan Governor Haruhiko Kuroda said in a press briefing that the central bank will not hesitate to ease its monetary policy if necessary because the economy is facing many uncertainties.

He added that it was too early to discuss an exit from the current policy, and that exit strategies should be discussed at policy meetings if the economy approaches the central bank’s 2% inflation target.

– Jihe Lee

The Bank of Japan offered to buy 600 billion yen in Japanese government bonds with maturities from one to three years.

The central bank said earlier that it will increase its direct purchases of Japanese government bonds to about 9 trillion yen per month from January through March – up from the previously planned 7.3 trillion yen.

The 10-year government bond yield rose 20.5 basis points earlier to 0.455%, hitting its highest level since 2015.

– Jihe Lee

The central bank said in a statement that the Bank of Japan has kept benchmark interest rates steady and announced that it will adjust the range of yield curve control.

He said the Bank of Japan will widen the volatility range for 10-year Japanese government bond yields from its current increase of minus 0.25 percentage point to plus and minus 0.5 percentage point.

The adjustment aims to “improve market performance and encourage smoother shaping of the entire yield curve, while maintaining accommodative financial conditions,” the Bank of Japan said.

The Japanese yen strengthened more than 2% to settle at 133.37 against the US dollar after the announcement.

– Jihe Lee

Minutes from the Reserve Bank of Australia’The December meeting showed that the central bank had considered a number of options for its interest rate decision, including a complete pause in increases.

“The Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate.” Session minutes He said.

RBA board members also noted the importance of “acting consistently”, adding that the central bank will continue to consider a range of options for next year as well.

– Jihe Lee

The People’s Bank of China kept the main interest rates for the one-year and five-year loan unchanged in December, according to an announcement.

The central bank maintained the one-year loan prime rate at 3.65% and the five-year loan prime rate at 4.30%, in line with expectations in a Reuters poll.

The offshore and onshore Chinese yuan were relatively flat at 6.9808 and 6.9783 against the US dollar, respectively.

– Jihe Lee

What’s next for China after it has rolled back a slew of Covid-19 measures?

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– Xavier Ong

Bank of Japan expected to stay Interest rates held steady at -0.10%, according to a Reuters survey of economists.

The interest rate decision is expected after the end of the central bank’s monetary policy on Tuesday.

Separately, the Japanese government and the Bank of Japan are said to aim to revise a statement adhering to a 2% inflation target as soon as possible, according to the Kyodo NewsCiting government sources.

– Jihe Lee

The Fed is likely to overinflate interest rate hikes to tame inflation and could end up tipping the US economy into recession, Ed Hyman of Evercore ISI wrote in a note on Sunday.

Hyman writes that the federal funds rate is now 6.5% against core personal consumption expenditures of 4.7% over the year and bond yields of 3.5%.

“It’s not just the Fed tightening: the European Central Bank, the Bank of England, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps more profoundly, the money supply is shrinking.”

In addition, Evercore’s Economic Diffusion Index is approaching recession territory along with other indicators such as the company’s surveys, inflation data, and layoff announcements. Wages gains are starting to slow and rising rents are showing early signs of abating, indicating that inflation is likely to run its course.

“In any case, 87 percent of American voters are worried about a recession,” Hyman said.

– Carmen Renick

The S&P 500 is down more than 6% this month, as Wall Street struggles heading into the end of the year. That puts it on track for its worst monthly performance since September. It would also be its biggest drop in December since 2018, when it fell by 9.18%.

Recession fears and disappointed hopes for a year-end rally weighed on stocks on Monday, sending them to a fourth straight negative close.

The Dow Jones Industrial Average fell 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47, and the Nasdaq Composite fell 1.49% to 10,546.03, dragged down by Amazon shares, which fell 3%.

– Carmen Renick