The yen surged and Asian shares fell sharply on Tuesday after the Bank of Japan’s (BOJ) decision to allow long term interest rates to rise more, a move analysts said could signal a step towards changing Japan’s long-held yield curve control.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.9%.
Japan’s Nikkei Stock Index (.N225) shed 2.2% after trading in positive territory earlier in the day, as stocks resumed trading following the BOJ decision.
In its final meeting of the year, the BOJ said its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around zero for the 10-year bond yield would remain.
But significantly it decided to allow the 10-year bond yield to move up and down 50 basis point each from the 0% target, against the previous 25 point each.
“The move came earlier than I had expected but a step towards the normalisation process of policy in Japan,” Kerry Craig, JP Morgan Asset Management’s global markets strategist, told Reuters.
“The market implications are most prevalent in the forex markets given the divergence between U.S. and Japanese policy settings.
This report’s information was first seen on REUTERS; to read more, click this link.
