The yen slipped back to 150 per dollar. After touching an almost 10-year low in morning trade, Japanese government bond futures rallied following the announcement. The Nikkei bounced 0.5%.
For now, investors seem to think that U.S. interest rates and the dollar will stay in the driver’s seat – leaving the yen to languish at an effective rate that is its lowest on record.
In the longer run, higher Japanese rates might encourage investors in the world’s biggest creditor nation to keep their money at home, instead of buying so many offshore assets. That could finally trigger some gains for the battered yen.
For the meantime the sense that some sort of anchor remains also spread some cheer to Treasury trade, sparking a brief rally.
Bond market focus now shifts to the U.S., where the Federal Reserve meets and the Treasury lays out its bond-selling plans.
On Monday the U.S. Treasury Department said it expects to borrow $776 billion in the fourth quarter, $76 billion less than it had anticipated in July. Its detailed refunding plans are due on Wednesday, as is the Fed’s policy decision.
In Europe, GDP and inflation data is due later on Tuesday.
