Signals from Federal Reserve and European Central Bank officials have been behind the eye-popping moves in world bond markets recently, but on Thursday investors were reminded of the punch the Bank of Japan can pack.
If the pointers from Fed and ECB officials have been towards the lower interest rate environment coming into view, the BOJ is headed in the completely opposite direction.
The dramatic moves in Japanese markets on Thursday will likely continue to reverberate around Asia on Friday, and it is perhaps fitting that the region’s economic calendar is dominated by key Japanese indicators.
The latest household consumption, bank lending and current account data are on tap, as well as revised third quarter GDP. The other main event in Asia on Friday is the Reserve Bank of India‘s interest rate decision.
If the RBI meets investors’ expectations – the key repo rate left unchanged at 6.50% for a fifth consecutive meeting, and signals it will be held there well into next year – there are unlikely to be any market fireworks.
There were plenty of fireworks in Japanese markets on Thursday, sparked by comments from BOJ Governor Kazuo Ueda about the exit from decades of ultra-low interest rate policy – the yen and bond yields soared, and stocks slumped.
These moves bear repeating, as they are a measure of how historic the BOJ’s shift is and how sensitive markets are to it.
