USDJPY - EDGY BOJ TURNS YEN TURBULENT; KURODA SPEECH *
USDJPY:
1. Price action immediately following BOJ this september was more than erratic but at the same time showed some consistency for those of you who can remember back to Julys performance - we moved instantly lower on the decision to 101 flat, before ripping 180pips higher to 102.8 to then lose most of the bids and trade back to the 101 base.
2. The BOJ decision itself, imo, was less than clear compared to July though and almost warranted this kind of whipsaw behaviour - especially given the anticipation (or not so much) of the Fed later today which is likely to mingle with risk sentiment and dollar leg of USDJPY the like at some point.
- The unclearness regarding whether the policy decision was net hawkish or dovish was given that there was no changes to the main policy tools (Depo, LSP, JGB, ETF), it would leave one thinking neutral-hawkish on expecttions - especially given a 5bps cut was the median BBG forecast. However, on the other hand, you had statements from BOJ including, "BOJ expanding its monetary base until it reaches its 2% inflation target" which is somewhat dovish given it puts never ending monthly JGB 80-100trn yen on the table for the next few years (unless the BOJ is delusional that less time is required). But at the same time this dovish statement was met by a bid from the BOJ to "increase yields for 10y JGB to 0%" and steepen the curve - which in itself is highly contradiction of ANY further expansion to the monetary base (given increases in money supply reduces rates). The BOJ knowing this then went on to cover saying "pace of purchases may fluctuate as to meet 0% target". Thus all in all the above, for me at least, left the overall decision uncertain at best. Given we are only 0.2% down it would be fair to say the outcome was infact neutral.
Neutral BOJ and No hike Hawkish Fed was my prediction before (see attached) and i stand behind the 100 level being reached as USD demand is likely to be flushed at some level when the 10-20% priced into USD fed funds is flushed out.
BOJ Decision:
JAPAN BOJ RATE DECISION STAYS FLAT AT -0.1 % (FCAST -0.1 %) VS PREV -0.1 %
BOJ DECIDES TO SET TARGET FOR LONG TERM INTEREST RATES
JAPAN BOJ BASE MONEY TARGET STAYS FLAT AT 80 TLN JPY (FCAST 80.00 TLN JPY) VS PREV 80.00 TLN JPY
BOJ: ADOPTS QQE WITH YIELD CURVE CONTROL
BOJ: TO ABANDON MONETARY BASE TARGET
BOJ SAYS NO OFFICIAL BASE MONEY TARGET, BUT MAINTAINS ANNUAL PACE OF JGB BUYING AT 80 TRLN YEN
BOJ: TO KEEP BUYING JGBS SO BALANCE OF ITS HOLDINGS INCREASES AT ANNUAL PACE OF 80 TRLN YEN
BOJ: INTRODUCES NEW MARKET OPS FOR YIELD CURVE CONTROL
BOJ: TO BUY JGBS SO 10 YR YIELD HOVERS AROUND 0 PCT
BOJ: PURCHASING YIELDS WILL BE SET PER AUCTION BY INDICATING THE SPREAD FROM THE BENCHMARK YIELD WHICH BOJ DETERMINES SEPARATELY
BOJ: DEPENDING ON MARKET CONDITIONS MAY SET JGB PURCHASE SIZE PER AUCTION TO FIXED AMOUNT OR UNLIMITED AMOUNT
BOJ: SCRAPS RANGE FOR DURATION OF JGBS THAT BOJ BUYS
BOJ: BOJ TO CONTINUE EXPANDING MONETARY BASE UNTIL CPI EXCEEDS 2 PCT AND STAYS ABOVE TARGET IN STABLE MANNER
BOJ: ADOPTS COMMITMENT TO LET INFLATION OVERSHOOT ABOVE 2 PCT
BOJ: BOJ CAN CUT SHORT TERM POLICY RATE, TARGET LEVEL OF LONG TERM RATES IN FUTURE EASING
BOJ: BOJ TO CONTINUE EXPANDING MONETARY BASE UNTIL CPI EXCEEDS 2 PCT AND STAYS ABOVE TARGET IN STABLE MANNER
BOJ: BOJ MAY ACCELERATE EXPANSION OF MONETARY BASE AS FUTURE POLICY OPTION
BOJ: PACE OF MONETARY BASE INCREASE MAY FLUCTUATE IN SHORT RUN UNDER MARKET OP THAT AIMS TO CONTROL YIELD CURVE
BOJ: MAINTAINS COMMITMENT TO ACHIEVE 2 PCT INFLATION AT EARLIEST DATE POSSIBLE
BOJ Kuroda:
1. Price action immediately following BOJ this september was more than erratic but at the same time showed some consistency for those of you who can remember back to Julys performance - we moved instantly lower on the decision to 101 flat, before ripping 180pips higher to 102.8 to then lose most of the bids and trade back to the 101 base.
2. The BOJ decision itself, imo, was less than clear compared to July though and almost warranted this kind of whipsaw behaviour - especially given the anticipation (or not so much) of the Fed later today which is likely to mingle with risk sentiment and dollar leg of USDJPY the like at some point.
- The unclearness regarding whether the policy decision was net hawkish or dovish was given that there was no changes to the main policy tools (Depo, LSP, JGB, ETF), it would leave one thinking neutral-hawkish on expecttions - especially given a 5bps cut was the median BBG forecast. However, on the other hand, you had statements from BOJ including, "BOJ expanding its monetary base until it reaches its 2% inflation target" which is somewhat dovish given it puts never ending monthly JGB 80-100trn yen on the table for the next few years (unless the BOJ is delusional that less time is required). But at the same time this dovish statement was met by a bid from the BOJ to "increase yields for 10y JGB to 0%" and steepen the curve - which in itself is highly contradiction of ANY further expansion to the monetary base (given increases in money supply reduces rates). The BOJ knowing this then went on to cover saying "pace of purchases may fluctuate as to meet 0% target". Thus all in all the above, for me at least, left the overall decision uncertain at best. Given we are only 0.2% down it would be fair to say the outcome was infact neutral.
Neutral BOJ and No hike Hawkish Fed was my prediction before (see attached) and i stand behind the 100 level being reached as USD demand is likely to be flushed at some level when the 10-20% priced into USD fed funds is flushed out.
BOJ Decision:
JAPAN BOJ RATE DECISION STAYS FLAT AT -0.1 % (FCAST -0.1 %) VS PREV -0.1 %
BOJ DECIDES TO SET TARGET FOR LONG TERM INTEREST RATES
JAPAN BOJ BASE MONEY TARGET STAYS FLAT AT 80 TLN JPY (FCAST 80.00 TLN JPY) VS PREV 80.00 TLN JPY
BOJ: ADOPTS QQE WITH YIELD CURVE CONTROL
BOJ: TO ABANDON MONETARY BASE TARGET
BOJ SAYS NO OFFICIAL BASE MONEY TARGET, BUT MAINTAINS ANNUAL PACE OF JGB BUYING AT 80 TRLN YEN
BOJ: TO KEEP BUYING JGBS SO BALANCE OF ITS HOLDINGS INCREASES AT ANNUAL PACE OF 80 TRLN YEN
BOJ: INTRODUCES NEW MARKET OPS FOR YIELD CURVE CONTROL
BOJ: TO BUY JGBS SO 10 YR YIELD HOVERS AROUND 0 PCT
BOJ: PURCHASING YIELDS WILL BE SET PER AUCTION BY INDICATING THE SPREAD FROM THE BENCHMARK YIELD WHICH BOJ DETERMINES SEPARATELY
BOJ: DEPENDING ON MARKET CONDITIONS MAY SET JGB PURCHASE SIZE PER AUCTION TO FIXED AMOUNT OR UNLIMITED AMOUNT
BOJ: SCRAPS RANGE FOR DURATION OF JGBS THAT BOJ BUYS
BOJ: BOJ TO CONTINUE EXPANDING MONETARY BASE UNTIL CPI EXCEEDS 2 PCT AND STAYS ABOVE TARGET IN STABLE MANNER
BOJ: ADOPTS COMMITMENT TO LET INFLATION OVERSHOOT ABOVE 2 PCT
BOJ: BOJ CAN CUT SHORT TERM POLICY RATE, TARGET LEVEL OF LONG TERM RATES IN FUTURE EASING
BOJ: BOJ TO CONTINUE EXPANDING MONETARY BASE UNTIL CPI EXCEEDS 2 PCT AND STAYS ABOVE TARGET IN STABLE MANNER
BOJ: BOJ MAY ACCELERATE EXPANSION OF MONETARY BASE AS FUTURE POLICY OPTION
BOJ: PACE OF MONETARY BASE INCREASE MAY FLUCTUATE IN SHORT RUN UNDER MARKET OP THAT AIMS TO CONTROL YIELD CURVE
BOJ: MAINTAINS COMMITMENT TO ACHIEVE 2 PCT INFLATION AT EARLIEST DATE POSSIBLE
BOJ Kuroda:
Comment:
BOJ GOV KURODA: DON'T THINK BUYING JGBS AT 80 TRLN YEN ANNUAL PACE WAS EXCESSIVE
BOJ GOV KURODA: LOWER REAL INTEREST RATES HAVE THE BIGGEST IMPACT ON BOOSTING ECONOMY
BOJ GOV KURODA: CONSIDERATION OF POTENTIAL IMPACT ON BANK EARNINGS WON'T LIMIT HOW FAR RATES CAN FALL
BOJ GOV KURODA: BOJ'S JGB BUYING HAS NOT HIT LIMIT AT ALL
BOJ GOV KURODA: CURRENT SHAPE OF YIELD CURVE SEEMS APPROPRIATE
BOJ GOV KURODA: AMOUNT OF JGB BUYING WOULD FLUCTUATE IN FUTURE DEPENDING ON FORMATION OF YIELD CURVE Central Banks 2016.09.21 10:24:00
BOJ GOV KURODA: REMAIN COMMITTED THAT WE WON'T TAKE INCREMENTAL MONETARY POLICY STEPS
BOJ GOV KURODA: WE DON'T INTEND TO FINE-TUNE POLICY AT EVERY SINGLE POLICY MEETING
BOJ GOV KURODA: DON'T THINK PREDICTABILITY OF MONETARY POLICY WILL LOWER BY SWITCHING TO YIELD CURVE CONTROL FROM MONETARY BASE CONTROL
BOJ GOV KURODA: AMOUNT OF JGB PURCHASES COULD RISE OR FALL IN FUTURE
BOJ GOV KURODA: LOWER REAL INTEREST RATES HAVE THE BIGGEST IMPACT ON BOOSTING ECONOMY
BOJ GOV KURODA: CONSIDERATION OF POTENTIAL IMPACT ON BANK EARNINGS WON'T LIMIT HOW FAR RATES CAN FALL
BOJ GOV KURODA: BOJ'S JGB BUYING HAS NOT HIT LIMIT AT ALL
BOJ GOV KURODA: CURRENT SHAPE OF YIELD CURVE SEEMS APPROPRIATE
BOJ GOV KURODA: AMOUNT OF JGB BUYING WOULD FLUCTUATE IN FUTURE DEPENDING ON FORMATION OF YIELD CURVE Central Banks 2016.09.21 10:24:00
BOJ GOV KURODA: REMAIN COMMITTED THAT WE WON'T TAKE INCREMENTAL MONETARY POLICY STEPS
BOJ GOV KURODA: WE DON'T INTEND TO FINE-TUNE POLICY AT EVERY SINGLE POLICY MEETING
BOJ GOV KURODA: DON'T THINK PREDICTABILITY OF MONETARY POLICY WILL LOWER BY SWITCHING TO YIELD CURVE CONTROL FROM MONETARY BASE CONTROL
BOJ GOV KURODA: AMOUNT OF JGB PURCHASES COULD RISE OR FALL IN FUTURE
BOJ GOV KURODA: NEW FRAMEWORK WILL ALLOW MONETARY POLICY TO BE MORE FLEXIBLE, SUSTAINABLE
BOJ GOV KURODA: WILL PURSUE STRONGER MONETARY EASING THAN BEFORE TO ACHIEVE 2 PCT INFLATION TARGET AS EARLY AS POSSIBLE
BOJ GOV KURODA: TO ACHIEVE SUSTAINABLE ECON GROWTH THROUGH SYNERGY EFFECTS OF MONETARY POLICY WITH GOVT FISCAL, STRUCTURAL POLICIES
BOJ GOV KURODA: OVERSHOOT COMMITMENT IS INTENDED TO LEAD TO INCREASE IN INFLATION EXPECTATIONS
BOJ GOV KURODA: NO CHANGE TO STANCE THAT WANT TO ACHIEVE 2 PCT INFLATION AS SOON AS POSSIBLE
BOJ GOV KURODA: HAVE ROOM TO EASE POLICY FURTHER AND WILL DO SO IF NEEDED
BOJ GOV KURODA: DEEPENING NEGATIVE INTEREST RATES WOULD BE AMONG OPTIONS WHEN EASING POLICY FURTHER AS NEEDED
BOJ GOV KURODA: OUR COMMITMENT TO 2 PCT PRICE TARGET REMAINS UNCHANGED DESPITE CHANGES TO POLICY FRAMEWORK
BOJ GOV KURODA: WILL USE YIELD CURVE CONTROL TO PREVENT DAMAGE TO SENTIMENT
BOJ GOV KURODA: IF YIELD CURVE IS TOO FLAT IT COULD HURT SENTIMENT DUE TO WORRIES ABOUT FINANCIAL SECTOR
BOJ GOV KURODA: DON'T THINK MONETARY EASING HAS REACHED ITS LIMITS
BOJ GOV KURODA: DON'T THINK MONETARY EASING HAS REACHED ITS LIMITS
BOJ GOV KURODA: WE WOULD'VE ACHIEVED 2 PCT TARGET BARRING IMPACT FROM OIL PRICE DROPS, SALES TAX, EMERGING MKT SLOWDOWN
BOJ GOV KURODA: OVERSHOOT COMMITMENT DOES NOT MEAN MEETING 2 PCT INFLATION WILL TAKE LONGER
BOJ GOV KURODA: INFLATION EXPECTATIONS NEED TO CONVERGE TOWARDS 2 PCT IN ORDER TO ACHIEVE PRICE GOAL SUSTAINABLY
BOJ GOV KURODA: WANT GOVT TO PROCEED WITH FISCAL POLICY AND STRUCTURAL REFORMS IN LINE WITH BOJ-GOVT JOINT STATEMENT
BOJ GOV KURODA: WE'RE NOT SAYING CAN TOTALLY CONTROL L-T RATES IN THE SAME WAY AS SHORT-TERM RATES
BOJ GOV KURODA: WEAKENING INFLATION EXPECTATIONS SINCE LAST SUMMER WAS A FACTOR BEHIND LAGGING INFLATION
BOJ GOV KURODA: STILL EXPECT TO MEET 2 PCT PRICE TARGET IN FISCAL 2017 BUT UNCERTAINTY IS HIGH