15 May 2023 | News & Feature

Yen and now

  • The “Fed pivot” sentiment continues to add strength onto the Indonesian financial market. However, the worsening earnings outlook sparks an outflow in the stock market while Indonesian bonds appear to have reached their ceiling.
  • Bank of Japan announced its readiness to lift the yield curve control (YCC) policy last week, although the announcement come with strict conditions. The termination of the YCC policy may harm Asian markets, although its impact on Indonesia may be limited given the still-low foreign capital stocks.
  • The termination of the YCC policy may spark a sell-off in the UST market, adding to the IDR’s value as the USD dwindle. However, the prospect of narrowing real rate differential in such a scenario means that Bank Indonesia’s path towards policy easing remains limited.