The
Bank of Japan is meeting later this week, the statement is due on
Friday. Today the Bank bought more JGBs than they planned across the
maturities curve. There is persistent chatter that the BOJ will
abandon its YCC control policy. The policy is directed at
10 year JGBs, and the bank has been successful at keeping yields below their desired cap at this
maturity. Meanwhile, though, higher yields have leaked across to
other maturities, and have been doing so for months. Today’s
action from the BOJ goes some way to addressing this inconsistency.
It’ll be unlikely to resolve the higher yield issue for an extended
period of time, but it does signal the Bank will not be dropping YCC
this week.

USD/JPY
has moved higher on the session.

Elsewhere
inflation was in the spotlight. We had the ANZ New Zealand Business
Survey highlighting that inflation pressure there remains ‘intense’
(see the NZ business confidence and activity post above for more on
this). Soon after we had Australia’s official CPI report for Q3.
Headline and core (trimmed mean) inflation came in above expectations
and accelerating from Q2. The Reserve Bank of Australia switched to a
+25bp rate hike in October, from +50s in the months prior, but the
data today at least raises the question of a return to +50 at the
November meeting. This meeting is next week, on Nov. 1. Given the RBA
and Treasury were expecting higher inflation (and for it to top in
the December quarter) it seems unlikely today’s data is enough to
prompt a 50bp hike next week. I had better not mention how (not) good
RBA inflation forecasting has been though. If
their forecasting is bad, their overconfidence is worse.

Analysts
in Australian banks (CBA and ANZ, for example) have revised their
forecasts for RBA rate hikes higher in the wake of the data.

AUD/USD
initially spiked above 0.6400 on the data but has since subsided back
to be little changed on the session.

The
People’s Bank of China set the CNY reference rate stronger than
expected for the CNY (i.e. a lower than expected USD/CNY). Chinese
mainland and HK shares rose again.