Posts tagged 'BoJ'

BoJ motive suggestions (with bonus rejections)

Explaining the BoJ’s shift to Quantitative and Qualitative Easing (QQE) with yield curve control is hard.

Or, at least, doing so definitively is hard because everyone is very keen to point out reasons against whatever suggestion you’ve got. Read more

In Japan, my kingdom for a dollar hedge

Could the collapse of covered interest rate parity be the harbinger of even stranger things to come ? At the heart of the issue is how on earth the interest rate differential between two currencies in the cash money markets is no longer equal to the differential between the forward and spot exchange rates. Read more

The ECB, innovation and yield targets

Where the BoJ leads the ECB may/may not follow.

You will all remember that last week the BoJ unveiled QQE with yield control — a 10yr yield target that may signal the end of QE as we know itRead more

Good idea, bad idea: Yield targeting edition

Good idea: More reactive than a quantitative target; can signal long-term commitment to policy; potentially reduces purchases required if market believes your yield target is credible; potentially good for effectiveness of fiscal policy; potentially good for banks as it can imply a steeper yield curve; and allows for an “automatic exit” from the policy if everything goes to plan.

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Has the BoJ signalled the end of QE as we know it?

That is, by diluting if not outright abandoning the quantitative/ balance sheet expansion aspect of its policy with a move to QQE with yield control has the BoJ admitted that the current stage of central bank action is nearing its limits?

Citi’s Buiter et al seem to think so: Read more

Japanese banks apparently like a policy aimed at helping them out

Shocking, we know.

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Inquiring minds want to know: Can the BoJ control the yield curve?

It’s almost BoJ comprehensive assessment time with Kuroda’s massive JGB purchases and NIRP policy standing naked beneath the spotlights awaiting judgement from their own creators.

Part of that judgment involves the pain that a NIRP and QQE induced flattening of the yield curve has wrought on financials. Thus, as we’ve talked about already, part of the recommended remedy might involve some sort of Japanese Operation Twist to steepen said yield curve and help out said financials.

Of course, the range of things the BoJ can actually do is large and the subject of predicable disagreement. So before we get to the yield curve question, here’s some summary for those who want it. Those who don’t can skip down to below the breaks. Read more

More on Libor and that Japan connection

October 17 is going to be a big day for global USD money markets. It’s the deadline by which prime money market reforms must adjust to floating NAV models, leaving only those funds investing in government securities able to offer par value protection. The likes of Zoltan Pozsar at Credit Suisse are expecting banks to lose a significant whack of unsecured bank funding as a result. Read more

This is nuts, ‘US30Yr Bond Yield to Evaporate’ edition

You’ll have already seen Nomura’s Toshihiro Uomoto attempt to explain the state of the world through chart, here.

But we thought we’d also share his suggestion that “30yr Treasury yield should near 0% within two years” as the “scarcity of products with a positive yield should continue facilitating the inflow of funds into the credit market.” Read more

When modern art meets global financial markets and monetary malaise

We were going to write about JGB yields jumping after the BoJ disappointed the market and made some (Nomura) think that even if the BOJ hasn’t reached the point where it can no longer deepen its use of current policy tools, “continued use of those tools could hasten the point at which it becomes difficult for the BOJ to act, with the exception of foul play*”

We were then going to compare that jump in yields to a similar jump in May 2013, when 10-year yields spiking “above 1% for the first time in 14 months… fed into an astonishing 7.3% slide in the Nikkei 225”, according to BoNYMellon’s Simon Derrick, and note that all we can really learn from that move is that it led to market turmoil.

But then we saw this work of chart, from Nomura’s credit team, and all of that good work was undone: Read more

Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

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The BoJ’s delivery problem

Expectations can be tricky things to manage, as in life so in central banking.

The Bank of Japan has everyone ramped up for its decision on the 29th. Although not many actually expect helicopter money (for a variety of reasons, including legal and excluding the fact that it’s not clear it would actually work) there is a belief in the market that some extra bit of stimulus is en route — which will be backed up by some fiscal goodness too.

Here’s a Barclays summary of those expectations: Read more

Explaining the BoJ’s reticence

You’ll have noticed that the yen and Nikkei were displeased yesterday. Like throw your toys out of the pram because you didn’t get what you wanted displeased. Like one of the worst one day JPY moves in the past decade displeased.

What they didn’t get, and what prompted that tantrum, was any auld bit of easing from the Bank of Japan.

And here are eight potential reasons why the BoJ disappointed, from SocGen: Read more

Today in disappointed markets…

UPDATE: JPY through Y108 as Kuroda says helicopter money is illegal. Of course, definitions matter where that is concerned.

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Jefferies: Japan has a fever and the only prescription is NGDP targeting and zero coupon perpetual bonds

We’re paraphrasing a bit in the headline but Jefferies do think the Japanese authorities are in a corner, painted in by a strengthening yen, tighter monetary conditions and a drop in inflation expectations.

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Did the G20 agree a currency accord and does it matter?

The first question is whether there was a lovely new, but secret, currency accord agreed at the G20 in Shanghai in February.

The answer is: Probably not. Read more

Irony and that JPY-equity correlation

Or, pictorially, what’s up with this?

And we mean apart from the whole “hey, we gave you negative rates why aren’t you giving us weaker yen?” thing as we’ve already spread plenty of pixels on a webpage about that.

It’s more about they strong negative correlation between the yen and equities on show in that chart. Read more

JP(wh)Y? revisited. And a break in the currency wars?

This post will be made up of two pieces. The first will try to explain why JPY continues to defy Japan’s negative rate-led demand for currency weakness. The second will add words to this picture from HSBC which proclaims a break in the (so-called, he adds hastily) currency wars, predicated mostly on said JPY strength:

At last sighting JPY was hovering at about Y108. That’s not good if you are the BoJ’s Kuroda or the overarching Abe, particularly because FX strength can beget more FX strength. The question is why did the yen start this slide: Read more


Kuroda et al might want to look away:

That’s the yen being “whacked to the lowest since October 2014” (when the BoJ decided to extend its easing programme) in the words of Citi’s FX team. It’s now under Y109 having been at Y125 in June last year. Also from Citi: Read more

Are the BoJ’s negative rates a con?

Some guesswork from Jefferies on Wednesday:

The upcoming 27-28 April BoJ meeting is likely to push the authorities into finally admitting a plan to consolidate the JGB holdings into perpetual bonds alongside a formal move away from inflation targeting to nominal GDP targeting. There is a growing realization that there are effective limits to how much more JGBs can be acquired…

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Central bank ammo, cut out and keep edition

By Morgan Stanley, do obviously click to enlarge:

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The BoJ’s negative rate squeeze, charted

From Deutsche’s Robin Winkler on the dispersion of pain from Japan’s new, tiered, negative rates regime:

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JPY, it wasn’t meant to be this way

What must the BoJ be thinking as the yen keeps getting stronger post the Japanese central bank’s announcement of negative rates?

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Tin hat time in Japan?

That’s the 10yr going negative for the first time, becoming the first G7 country to do so. Read more

Japanese banks don’t like something

Macro Man might just be on to that something here…

That green line heading down and away from the rest (which you shall see more easily after some enlarging via clicking) is the performance of Japan’s banks since the BoJ went negative last week.

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Negativity all the way down

Not sure how many more pixels you’ll tolerate us spilling on the BoJ’s move negative, but this from Simon Derrick at Bank of New York Mellon seems worth your time. With our emphasis, and pars broken up for online readability:

Whether or not the BOJ’s decision was a direct reaction to the ECB’s decision to potentially push even further into negative territory doesn’t really matter. Indeed, it doesn’t even really matter whether or not the BOJ was trying to weaken the JPY by their move (in our opinion plausible deniability remains a key tool for central bankers).

What does matter is that four of the eight members of G8 (France, Germany, Italy and Japan) now have an official negative deposit rate while Canada continues to suffer the impact of collapsing oil prices (Russia, which has had its membership suspended, suffers from the same issue of course).

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Er, what lower bound? And $5.5tn worth of negative nuts

ICYMI, and on the back of the BoJ going negative, “the universe of DM government bonds trading with a negative yield rose to a record high of $5.5tr, or 24% of the JPM Global Government Bond Index,” according to JPM.

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How much yen can you fit in a cubic metre?

If the BoJ and Mr Kuroda are thinking about storage costs – after taking interest rates to minus 0.1 per cent and saying they “will cut the interest rate further into negative territory if judged necessary” — this might be useful.

From Oxford Econ’s Gabriel Stein & Ben May:

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That was then, this is now: BoJ and negative rates edition (UPDATED)

Bank of Japan Governor Haruhiko Kuroda said he is not thinking of adopting a negative interest rate policy now, signalling that any further monetary easing will likely take the form of an expansion of its current massive asset-buying programme.

Reuters, Jan 21

The Bank of Japan has adopted negative interest rates in their first benchmark rate move in five years, but has also chosen not to expand its quantitative and qualitative easing programme beyond its current level of buying Y80tn assets a year.

The BoJ has adopted a benchmark rate of -0.1 per cent, from a previous level of 0.1 per cent. It is the first time they have moved interest rates since October 2010….

The BoJ also indicated it has not ruled out further imminent easing, saying “it] will cut the interest rate further into negative territory if judged as necessary.”


Wait, what? Read more

For the world is cold and less full of inflation

So charted by Citi.

As they say, the coolness of global inflation is not just an energy price story:

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