A surprise change in the policy of influencing the yield curve for ten-year government bonds by the Japanese central bank has shaken the world stock markets. Japanese government bonds became more attractive, which investors took advantage of.
Stocks in the red
Stocks in Asia and Europe traded in the red with exceptions in the middle of the pre-Christmas week. The biggest drop occurred on the Tokyo Stock Exchange, whose main Nikkei index weakened by almost 2.5 percent. The stock exchange in Shanghai or Hong Kong also lost more than a percent.
European shares also started trading with a decline, with the largest drop recorded by the Paris stock exchange by almost 0.4 percent. Similarly, the pan-European Stoxx 600 index or the DAX index of the Frankfurt Stock Exchange lost.
The decision of the Bank of Japan changed the situation
The markets thus reacted to the surprising decision of the Bank of Japan, which unexpectedly widened the target range of the interest yield for 10-year government bonds from the previous 0.25 to 0.5 percentage point for yield movement to either side from the set target level of 0 percent. Investors responded by switching their investments from stocks to Japanese government bonds, as the aforementioned decision means a de facto increase in the yield of Japanese government bonds.
