Asian stocks fall as the BOJ makes a surprise policy change that makes the yen go up.
The yen went up and Asian stocks went down sharply on Tuesday after Japan’s central bank changed its bond yield controls in a way that surprised everyone. This will let long-term interest rates rise more.
The Bank of Japan kept most of its policies the same, but it changed the range of acceptable long-term yields from 25 basis points to 50 basis points on either side.
The yen went up right away, and the dollar went down by 2.71 percent to 133.16, which is the lowest it has been in four months.
Related: Asian stocks drop because people are worried about a recession, and weak data hurt the Nikkei.
The Nikkei benchmark index, which had been going up earlier in the day, fell 2.71 percent.
MSCI’s biggest index of Asia-Pacific stocks outside of Japan fell 1.6%.
The BOJ’s decision was seen as a sign that the forces that pushed the yen to its lowest level in 30 years may be starting to change.
“The move happened sooner than I expected, but it’s a step toward normalising policy in Japan,” Kerry Craig, a global markets strategist at JP Morgan Asset Management, told Reuters.
“Because U.S. and Japanese policies are different, the effects on the market are most noticeable on the forex markets.”
“Even though the gap is still big, the hint that the BOJ is slowly moving away from ultraloose policy should be good for the yen in the short term.”
In other parts of Asia, Australian stocks kept losing ground and were down 1.54% in the afternoon.
The Hang Seng Index in Hong Kong was down 1.9%, and the CSI300 Index in China was down 1.62%.
In early European futures trading, the Euro Stoxx 50 was down 1.23 percent to 3,773, the German DAX was down 1.32 percent to 13,832, and the FTSE was down 0.83 percent to 7,306.5.
The S&P 500 e-minis, which are futures on U.S. stocks, were down 0.85% at 3,812.8.
The yield on benchmark 10-year Treasury notes went up to 3.6825% in Asian trading, from 3.583% at the end of U.S. trading on Monday.
The two-year yield, which goes up when traders think Fed Fund rates will go up, was 4.2848%, which was higher than the US close of 4.262%.
Investors were still very worried about China reopening to the rest of the world after nearly three years of COVID lockdowns.
On Monday, Credit Suisse changed its outlook for China’s stock markets for the next year from neutral to outperform.
Related: Asian stocks fall along with the dollar because the Fed is becoming more aggressive and China’s COVID is worried.
“The whole story of China has changed.” “It used to be that COVID zero was putting pressure on the economy, but now the plan is to move toward reopening,” said Suresh Tantia, a senior investment strategist at Credit Suisse.
“And when that happens, the Chinese economy and markets will start to get better.”
U.S. crude went up by 0.41 percent to $75.5 per barrel. Brent crude rose to $79.87 per barrel.
At $1,790.83 per ounce, spot gold was a little bit higher. [GOL/]