Yen has surged and Nikkei (Japanese shares) trashed. The initial headlines were that the BOJ had left its policy unchanged, which they have. to maintain a -0.1% target for short-term rates and a 0% cap for the 10-year bond yield Yield A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it. These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products. Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income. Why Do Yields Matter? At any point in time, all financial instruments compete with each other in a public marketplace. Analyzing yields is one among many metrics used by analysts and investors and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. By extension, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also influenced by expectations of inflation. Fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today. The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness is described by the yield curve. Instruments over longer intervals commonly have a higher yield than short dated instruments. The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. The more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk. A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it. These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products. Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income. Why Do Yields Matter? At any point in time, all financial instruments compete with each other in a public marketplace. Analyzing yields is one among many metrics used by analysts and investors and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. By extension, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also influenced by expectations of inflation. Fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today. The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness is described by the yield curve. Instruments over longer intervals commonly have a higher yield than short dated instruments. The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. The more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk. Read this Term (around 0%)BUT they widened that band in which they allow the 10 yr JGB to move from 0.25% to 0.5%. This, in effect, is a long-awaited ‘pivot’ from the BOJ. A mini pivot for sure, but given nothing was expected until April, its significant.More significant items from the statement: to increase bond purchases to JPY 9tln/month in Q1will review operation of Yield Curve Control (YCC)to conduct additional JGB purchases on December 22In widening the band for the JGB target, the BOJ says that “the functioning of bond markets has deteriorated… If these market conditions persist, this could have a negative impact on financial conditions.”JPY JPY The Japanese yen (JPY) is the official currency of Japan and at the time of writing it is the third most-traded currency in the world behind only the US dollar and euro.The JPY is used extensively as a reserve currency and is relied upon by forex traders as a safe haven currency.Originally implemented in 1871, the JPY has had a long history and has survived multiple world wars and other events.This was followed by the creation of the Bank of Japan (BoJ) in 1882 and the full oversight of the JPY by the Japan ese government only in 1971. Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ also adheres to a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policy What Factors Affect the JPY? The aforementioned role of the BoJ has dramatically shaped the JPY in forex markets. Any further changes in monetary policy by the central bank are closely watched by forex traders. Additionally, the Overnight Call Rate is the key short-term inter-bank rate. The BoJ utilizes the call rate to signal monetary policy changes, which in turn impact the JPY. The BoJ also purchases both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis in order to inject liquidity into the monetary system. The consequent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important to the JPY. The most important of these releases in Japan are gross domestic product (GDP), the Tankan survey (quarterly business sentiment and expectations survey), international trade, readings of unemployment, industrial production, and money supply (M2+CDs). The Japanese yen (JPY) is the official currency of Japan and at the time of writing it is the third most-traded currency in the world behind only the US dollar and euro.The JPY is used extensively as a reserve currency and is relied upon by forex traders as a safe haven currency. Originally implemented in 1871, the JPY has had a long history and has survived multiple world wars and other events. This was followed by the creation of the Bank of Japan (BoJ) in 1882 and the full oversight of the JPY by the Japanese government only in 1971. Japan has historically maintained a policy of currency intervention, continuing to this day. The BoJ also adheres to a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policy What Factors Affect the JPY? The aforementioned role of the BoJ has dramatically shaped the JPY in forex markets. Any further changes in monetary policy by the central bank are closely watched by forex traders. Additionally, the Overnight Call Rate is the key short-term inter-bank rate. The BoJ utilizes the call rate to signal monetary policy changes, which in turn impact the JPY. The BoJ also purchases both 10- and 20-year Japanese government bonds (JGBs) on a monthly basis in order to inject liquidity into the monetary system. The consequent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates. Economic data is also very important to the JPY. The most important of these releases in Japan are gross domestic product (GDP), the Tankan survey (quarterly business sentiment and expectations survey), international trade, readings of unemployment, industrial production, and money supply (M2+CDs). Read this Term has surged, USD/JPY plunged to circa 134.30 while the Nikkei dropped (futures trade is active, down over 4%, physical is closed for the lunch break … traders getting indigestion as we speak)ADVERTISEMENT – CONTINUE READING BELOW