Japan's unexpected turn on its monetary policy has rattled global markets as the Bank of Japan (BoJ) loosened its 10-year yield curve cap. "The Bank of Japan caught markets off guard by tweaking its yield controls to allow the yield on its 10-year JGB to move 0.5% either side of its 0% target, up from 0.25% previously, in a move aimed at cushioning the effects of protracted monetary stimulus measures," according to CNBC.
This decision sent the yen soaring by about 4% against the U.S. dollar in early trading, a massive jump for one of the world's most important currency pairs. "Japanese rates will remain low, but the action signaled that, after two decades of trying mightily to coax inflation higher, even Japan sees a changing balance of risks," reads an article from Axios.
"The consensus was entirely that the BoJ would stand pat," said Stefan Angrick, senior economist at Moody's Analytics. Analysts expected the BoJ to hold onto current monetary policies until spring of 2023, but the bank's decision was mainly driven by "volatility in overseas financial and capital markets," per The New York Times. Near-zero interest rates will remain unchanged, the bank said in a statement.