Nikkei 225 falls more than 2% after Bank of Japan widens yield target range, yen strengthens

The Bank of Japan kept its benchmark interest rates stable and announced it would change its yield curve control band, the central bank said in a statement.

The BOJ will widen the range of fluctuations in 10-year Japanese government bond yields from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points, it said.

The adjustment aims to “improve market functioning and encourage smoother formation across the yield curve, while maintaining accommodative financial conditions,” the BOJ said.

The Japanese yen strengthened more than 2% to settle at 133.37 against the US dollar after the announcement.

– Jihye Lee

Minutes from the Reserve Bank of Australia’The December meeting showed the central bank considered a number of options for its spot rate decision, including a full pause in hikes.

“The board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate,” the board said. minutes said.

RBA board members also stressed the importance of “acting consistently”, adding that the central bank will also continue to consider a range of options for the year ahead.

– Jihye Lee

The People’s Bank of China kept its prime rates on one-year and five-year loans unchanged in December, a statement said.

The central bank kept its one-year prime rate at 3.65% and its five-year prime rate at 4.30%, in line with expectations from a Reuters poll.

The offshore and onshore Chinese yuan were relatively stable at 6.9808 and 6.9783 against the US dollar, respectively.

– Jihye Lee

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— Zavier Ong

The Bank of Japan is should keep its interest rates stable at -0.10%, according to a survey of economists by Reuters.

The rate decision is expected after the end of the central bank’s two-day monetary policy on Tuesday.

Separately, the Japanese government and the BOJ reportedly plan to revise a statement pledging to hit a 2% inflation target as soon as possible, according to Kyodo Newsciting government sources.

— Jihye Lee

The Federal Reserve is likely overdoing its rate hikes to tame inflation and could end up tipping the U.S. economy into a recession, Evercore ISI’s Ed Hyman wrote in a Sunday note.

The fed funds rate is now 6.5% against a base PCE of 4.7% for the year and bond yields at 3.5%, Hyman wrote.

“And it’s not just Fed tightening: the ECB, BoE, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps deeper, the money supply is contracting.”

Additionally, Evercore’s Economic Diffusion Index is approaching recessionary territory along with other indicators such as business surveys, inflation data and layoff announcements. Additionally, wage gains have started to slow and high rents are showing early signs of easing, signaling that inflation has likely run its course.

“In any event, 87% of American voters are worried about a recession,” Hyman said.

—Carmen Reinicke

The S&P 500 has fallen more than 6% this month as Wall Street struggles as the end of the year approaches. That puts it on track for its worst monthly performance since September. It would also be its biggest decline in December since 2018, when it slid 9.18%.

Recession fears and dashed hopes of a year-end rally weighed on stocks on Monday, sending them to the fourth consecutive negative close.

The Dow Jones Industrial Average fell 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47, and the Nasdaq Composite lost 1.49% to 10,546.03, dragged down by shares of Amazon, which slipped 3%.

—Carmen Reinicke