On Friday, the unexpected move by the Bank of Japan caused global market turbulence. The stance of Governor Kuroda has left analysts divided, and the market sentiment is also quite uncertain.
From the perspective of Yield Curve Control (YCC), although the Bank of Japan did not directly adjust the target interest rate range, it successfully convinced the market that the &#34;new upper limit&#34; of YCC has become 1% by using the new wording of &#34;more flexible control&#34; and purchasing 10-year government bonds at a fixed rate of 1.0%.
However, some believe that the dovish signal from the Bank of Japan is hidden in the inflation forecast for next year.
Anna Stupnytska, Global Macro Economist at Fidelity International, stated that the Bank of Japan's lower inflation forecast for next year indicates that policymakers' preference for ultra-loose monetary policy remains unchanged.
In the updated inflation forecast released on Friday, the Bank of Japan's Monetary Policy Committee raised the median CPI forecast for the fiscal year 2023 from 1.8% in April to 2.5%, but lowered the median CPI forecast for the fiscal year 2024 from 2% in April to 1.9%, which is below the Bank of Japan's target.
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Stupnytska believes that this is quite a dovish performance, implying that they are not ready to take any action on interest rates.
UBS Group strategists also believe that Bank of Japan Governor Kuroda's stance is &#34;very dovish.&#34; UBS now predicts that the yen will reach 130 against the US dollar by the end of this year, compared to the previous forecast of the yen appreciating to 120 against the US dollar.
After the Bank of Japan's decision was announced, the yen's trend was also quite uncertain. The yen against the US dollar initially reversed the overnight gains, plunging by 1.2%, then reversed again, surging more than 1%, but ultimately gave up the gains and continued to fall to 141, 300 points lower than the previous day's level.
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Japanese stocks initially plunged after the decision was announced, but recovered most of the losses by the close, ending down 0.4%.
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Only Japanese bonds continued to decline, with the yield on 10-year Japanese government bonds rising to 0.56%, the highest level since 2014.
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Market interpretation of the "surprise attack" by the Bank of Japan has shifted from hawkish to dovish: the yen gave back all its intraday gains, and Japanese stocks experienced a sharp decline at one point, but eventually recovered most of the losses.

Actual Dovish Signal! "Real Change" from the Bank of Japan: Downward Revision of Next Year's Inflation Expectations