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Bank of Japan tweaks 10-year JGB band, yen weakens.


Written by Rees Popovici, Senior Research Advisor

  • The Bank of Japan upheld its commitment to shocking most market participants by tweaking its 10-year JGB (Japanese Government Bonds) band to 0.5% to 1.5%, targeting a rate of 1%.

  • This tweak accompanies a fresh quarterly report, where the Bank forecasted that the Japanese economy will be maintaining a positive output gap for longer than expected, putting inflationary pressures on prices.

  • The Bank also revised its median inflation forecast upwards for 2023 from 1.8%, to 2.5%, while downgrading its median 2024 forecast from 2.0% to 1.9%.

  • The yen traded sharply higher against the dollar, with the USD/JPY exchange rate at 138.7 immediately following the tweak, before giving up all gains and reversing substantially lower to 143.3 as of the 3rd of August, as the Bank assures markets that this is not a precursor towards policy normalization.

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