Wednesday, September 21, 2016

Japan: Part One Of Our Under-Whelming Central Bank Plan

Stop Killer

By -

Well, the big news tonight was what Japan would be. Here’s the skinny from our friends at ZH:

Disappointment on rates (no change)
  • *BOJ MAINTAINS POLICY BALANCE RATE AT -0.100%
But it appears BoJ unleashes its reverse twist idea…
  • *BANK OF JAPAN TAKES ADDITIONAL ACTION
  • *BOJ TO INTRODUCE QQE WITH YIELD CURVE CONTROL
  • *BOJ SCRAPS AVG MATURITY TARGET OF JGB HOLDINGS
  • *BOJ TO BUY JGBS IN LINE WITH CURRENT PACE (disappointing)
And ups it ETF-buying…
  • *BOJ: 2.7T YEN OF ETF BUYS FOR ETFS THAT TRACK TOPIX
Will do more jawboning…
  • *BOJ TO ENHANCE FOWARD GUIDANCE
  • *BOJ TO EXPAND MONETARY BASE UNTIL INFLATION STABLE ABOVE 2%
  • *BOJ BOARD VOTES 7-2 ON GUIDELINES FOR MARKET OPERATIONS
So the bottom line is bigger ETF buying, maintains rates (no easing), maintains bond-buying (no easing), unveils “yield curve control” (steepens curve but crushes bank balance sheets through long bond MTM losses)
But then they dropped the final tape-bomb…
  • *BOJ: MONETARY BASE MAY FLUCTUATE TO ACHIEVE YIELD-CURVE CONTROL
In other words – QQE size may increase… which the market liked…
Looking at the USD/JPY chart, it’s roaring higher, but at first the floor fell out (same goes for the ES) so whoever had stops in place……….sayonara!
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