Asset purchases agreed upon. EU markets slightly lower. Oil Up
BOJ holds -0.1%, targets 0% 10-yr yields. Asia mixed, Europe cautious, U.S. focuses on earnings. Oil up, global stocks fluctuate.
Japan and the Asian market
The Bank of Japan (BOJ) announced its monetary policy decisions at the recent meeting, stating how it will approach its’ yield curve control and asset purchases.
BOJ Yield flexibility
The BOJ decided to maintain a negative interest rate of minus 0.1 percent on Policy-Rate Balances and continue purchasing Japanese government bonds (JGBs) to keep 10-year JGB yields around zero percent. The upper bound of 1.0 percent for 10-year JGB yields was established as a reference. The central bank emphasized flexibility in its operations, indicating a commitment to large-scale JGB purchases and responsive actions for each maturity.
BOJ Asset Purchases
Guidelines for asset purchases were unanimously agreed upon. The BOJ outlined plans to purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) with annual limits of about 12 trillion yen and about 180 billion yen, respectively. Corporate bonds and commercial paper (CP) will also be targeted to maintain stability, with a focus on gradually returning corporate bond amounts outstanding to pre-pandemic levels.
BOJ Monetary Loosening
Given the high uncertainties in domestic and global economies, the BOJ expressed a commitment to continue monetary easing. The central bank emphasized patience in the face of economic and financial market developments. The goal is to achieve the 2 percent price stability target alongside sustainable wage increases. The BOJ also extended the deadline for the Fund-Provisioning Measure to Stimulate Bank Lending by one year.
The BOJ decision had a mixed impact on Asian markets. While Japanese stocks and the yen benefited from unchanged policies, Chinese markets faced challenges. Chinese stocks experienced a modest recovery after touching five-year lows, and speculation about a government rescue package worth 2 trillion yuan. Hong Kong’s Hang Seng surged over 3%, driven by news of regulatory changes in the online gaming sector.
The Japanese yen also saw movements, influenced by the BOJ’s decision.
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The European Markets
European markets saw a subdued start, with Germany’s DAX and France’s CAC 40 slightly lower. The FTSE 100 in the UK edged higher. An unconfirmed report on China’s plans to stabilize markets, involving tapping offshore funds, influenced market sentiment. Investors remained cautious amid uncertainties about the effectiveness of potential rescue measures.
The euro strengthened against the dollar, rising to $1.0899 from $1.0884.
US Company earnings
In the U.S., futures for the S&P 500 and Dow Jones slipped marginally. The focus shifted to corporate earnings reports, with around 70 S&P 500 companies set to announce results. The government’s upcoming estimate of Q4 2023 economic growth and the inflation gauge reading will be closely watched. Treasury yields, reflecting expectations of future rate cuts, remained subdued, contributing to a relaxed atmosphere in the stock market.
Oil Prices modestly up
Global stocks experienced minor fluctuations, while oil prices showed a modest increase. U.S. benchmark crude rose to $75.04 per barrel, and Brent crude reached $80.32 per barrel.
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