USD/JPY flows: The end of an era
BoJ hiked rate to 0-0.1%, discontinue purchase of ETF, J-Reits and YCC phasing out.
The BoJ has decided to exit negative interest rate in the March meeting. The BoJ has raised short term interest rate from -0.1 - 0% to 0 - +0.1%, signalling YCC is officially removed, yet bond purchase operation persists at the same magnitude and any spike in long term JGB yield will be met with BoJ's response (intervention). The BoJ will also discontinue the purchase of ETFs and REITs as "it came in sight that the price stability target of 2 percent would be achieved in a sustainable and stable manner toward the end of the projection period of the January 2024 Outlook". The forward guidance changed to " Given the current outlook for economic activity and prices, it anticipates that accommodative financial conditions will be maintained for the time being." suggests the BoJ do not see tightening with the current outlook.
It does not come as a surprise as headline labor earnings and wage negotiations results have been upbeat. The forward guidance is more dovish than expect as it does not suggest any more tightening within the current outlook. USD/JPY rose by 0.48% to 149.86.