Kuroda Ends BOJ Tenure in the Same Way He Began It: Driving Yields Wild

(Bloomberg) — Bank of Japan Governor Haruhiko Kuroda looks set to end his tenure the same way he started it: sending yields careening in the world’s second-largest government bond market.

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Japan’s benchmark 10-year yield tumbled as much as 14 basis points Wednesday after the BOJ defied some expectations for another shift in policy. This is a match for the intraday drop of Japan’s benchmark 10-year yield on Wednesday after the BOJ defied some expectations for a shift in policy. It happened just days after Kuroda pledged to double its monetary base.

The latest jolt underscores how traders have consistently struggled to read Kuroda, whose decade-long reign is likely to be associated with the central bank’s ultra-loose settings. While Japan’s quickening inflation is fueling bets for a policy shift, global markets may once again find it hard to divine the exact timing for a move.

“Markets continue to get the BOJ wrong, especially when it comes to the timing of actual policy changes,” said Martin Malone, chief economist at Aurel in London. “Even as the growth and inflation outlook is developing in a way that would allow the central bank to end curve control, any actual change is still some ways off.”

Investors were similarly misled by Kuroda in December, when the BOJ unexpectedly increased the cap on its benchmark yield curve. The 10-year bond yield experienced its highest intraday jump in three years, while the yen rose almost 4% immediately after the shift.

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Tensions in the market are likely to remain elevated, with a growing number of investors becoming convinced that the BOJ can’t hold on to its accommodative stance while the Federal Reserve forges ahead with more rate hikes.

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