JPMorgan Says BOJ’s Policy Adjustment Indicates Upcoming Pivot in Monetary Changes

JPMorgan wrote in a note stating that the Bank of Japan’s announcement in changing yield-curve control policy came as a surprise as the market expected for no change in policy at this meeting. JPMorgan viewed that the move indicated that new governor and deputy governors who are to take over next spring could bring a pivot in the BOJ’s monetary policy framework and conduct.

The financial firm stated that the policy change on Tuesday caused the yen to strengthen and the Nikkei/TOPIX to fall. The stock market has already corrected over the past several days in response to media reports on potential revisions to the government and BOJ’s policy accord.

JPMorgan wrote that it thinks market reaction is overshooting market expectations, regarding the BOJ’s move, while stating that bank stocks rose on Tuesday, but still seeing further upside given the potential for future changes in policy.