BoJ: No clear signals that a further policy adjustment is imminent – Wells Fargo

At its latest monetary policy meeting, the Bank of Japan (BoJ) widened the range of its target for the 10-year bond yield and announced the results of its policy review.  According to analysts at Wells Fargo, the BoJ made only modest tweaks to its policy framework. They see no clear signals that a further policy adjustment is imminent.

Key Quotes: 

“The BoJ modestly widened the tolerance range for its 10-year Japanese government bond yield target to +/- 25 basis points. The BoJ also removed the previous floor for its purchases of exchange-traded funds, and established an interest rate scheme to promote lending that could make it easier for the central bank to lower its already negative policy interest rate.”

“Should U.S. Treasury yields continue to move up, is seems unlikely Japanese bond yields will follow higher in any meaningful manner given only the slight widening of the tolerance range.”

“The changes announced at today's policy strategy review were relatively modest overall, though it still represents a significant event. Given the varied changes announced, we see no clear dovish or hawkish signal from the strategy review. Importantly, we also do not perceive any signal that imminent further rate cuts will be forthcoming. Indeed, our view remains that BoJ monetary policy is likely to remain on hold for an extended period and that, with the new tolerance range, Japanese bond yields are likely to edge only gradually higher over time.”

“Given our global scenario involves higher U.S. Treasury yields, and improvement in global growth and market sentiment, we remain comfortable with our outlook for moderate weakness in the Japanese yen versus the U.S. dollar over the medium-term.”