The Bank of Japan (BoJ) recently announced adjustments to its Yield Curve Control (YCC) policy, expanding the fluctuation range of long-term interest rates from ±0.25% to ±0.50%. This unexpected move was interpreted by the market as a signal of a shift away from monetary easing, triggering violent volatility in financial markets. On the day of the policy announcement, Japan’s 10-year government bond yield rose to 0.46%, and climbed further to 0.48% the next day, prompting the Osaka Exchange to activate the government bond futures circuit breaker mechanism.

The foreign exchange market reacted more intensely—the Japanese yen soared 7 yen against the US dollar in a single day, briefly touching 132.60 yen per US dollar, its highest level since July 2015. Tokyo stocks also came under pressure, with the Nikkei 225 falling 669 yen, or 2.5%, on the day. Major Asian stock indexes such as South Korea’s KOSPI and Hong Kong’s Hang Seng Index also corrected under the spillover effect.

BoJ Governor Haruhiko Kuroda emphasized that the adjustment is aimed at improving market function rather than tightening monetary policy. The central bank will continue to maintain the short-term interest rate at -0.1% and increase the monthly purchase volume of long-term government bonds to 9 trillion yen in the first quarter of next year. However, the market generally believes that against the backdrop of continued interest rate hikes in Europe and the United States, this move by Japan constitutes a “de facto interest rate hike,” marking the entry of its decade-long monetary easing policy into a transition period.