Asian stocks slip, yen surges on speculation of Bank of Japan policy tweak
The BOJ sets policy later in the session. The Nikkei newspaper reported, without citing sources, that policymakers will discuss tweaking the yield control policy to allow 10-year government bond yields above a 0.5% cap in some circumstances. The yield leapt to 0.505% in early trade.
The yen had earlier jumped about 0.5% on the report, gaining even as the dollar rose elsewhere after strong U.S. economic data and a toned down outlook from the European Central Bank. The yen was holding about 0.5% higher at 138.83 per dollar in early trade, helped by Tokyo consumer prices rising slightly more than expected and as the risk of a policy surprise spooked short sellers.
«I wouldn't be running short into the BOJ,» said Westpac strategist Imre Speizer. «I think the idea is even a tiny tweak is a big deal for the BOJ. We'll probably get a reaction either way.» MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4%.
Japan's Nikkei opened 1.4% lower though bank shares surged to an eight-year high on the prospect of rising interest income at lenders. «If the BOJ adjusts its yield curve control program, financial markets will likely take it as the start of a policy tightening cycle regardless of the BOJ's rationale,» said Commonwealth Bank of Australia strategist Kristina Clifton. «Under such scenario, we consider dollar/yen… can lose about two to four yen on the day.» A tweak would also cap what may prove a landmark week for central banks, with markets pricing a better-than-even chance that the Federal Reserve and ECB have made their final hikes of the cycle.
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