At the Bank of Japan’s monetary policy meeting yesterday, the BoJ changed its policy by setting JGB1%, previously set as the upper limit in its limit operations, as the “target” and allowing for some upward movement in interest rates.

Whether this is more hawkish or more dovish than expected is a matter of debate, but each market seems to be interpreting it in its own way. In the foreign exchange and stock markets, the continuation of the ultra-easy monetary policy has sold the yen and bought stocks.

In the bond market, interest rates are likely to gradually test 1% and above 1%.
The lack of actual foreign exchange intervention in October was also a factor in selling the yen.

However, Treasurer Kanda said today that he is “on standby” for currency intervention, and it would be better to assume that he will intervene when the yen is around or above last year’s high of 151.95 yen.

For the time being, there will probably be some profit-taking selling before intervention, and at higher prices, the USD/JPY may fall a little, as the market sells off on the assumption of intervention. However, it will test the intervention level sooner or later.