Jamie McGeever looked at the day ahead in Asian markets by Reuters -- A look at the day ahead.
The waiting is almost over.
The Bank of Japan BOJ is poised to make one of its most eagerly anticipated policy decisions in years, if not decades, after it stunned markets last month by unexpectedly tweaking its YCC cap on government bond yields.
The speculation is rife that the BOJ will make further changes to its YCC, possibly raising the cap and tightening policy by allowing the 10 year bond yield to shoot higher.
The yen is close to an eight-month high against the dollar, up nearly 20% since October, and the 10 year yield is above the 0.50% de facto cap for a third straight day.
Analysts at Citi think the BOJ will abolish its YCC policy. If it does, expect the dollar yen to fall by 5%, domestic yields to rise and Japanese life insurers and funds to repatriate trillions of yen of capital.
Others cautioned that the market may be setting itself up for a fall, setting a high bar for BOJ Governor Haruhiko Kuroda and colleagues to show they are moving away from the ultra-loose policy of recent years. The era of Japanese capital flowing into higher-yielding foreign bonds seems to be over, for now. Japanese investors were net sellers last year, and the rising hedging costs suggest that they won't be buyers this year.
World markets were in wait- and- see mode on Tuesday and held to pretty narrow ranges despite the torrent of news and data.
China has a weak fourth quarter GDP and December snapshot of retail sales, investment and industrial output, but they were all significantly stronger than expected by economists. A key index of US manufacturing showed that activity crashed this month, and Goldman Sachs reported a huge Q 4 earnings miss. The Nasdaq was above water thanks to a surge in Tesla shares, thanks to surging sales in China.
Three key developments that could give more direction to markets on Wednesday: