BoJ: Market still not convinced - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the market commentary from a number of Japanese analysts over recent weeks suggest that the BoJ would do little to change policy and the JPY continues to be relatively volatile. 

Key Quotes

“Japanese bond yields have risen and the curve has steepened, but short term yields remain significantly higher that levels preceding the 29-July BoJ policy meeting and 10-year yields are still somewhat negative.

This suggests that the market is reluctant to believe that the BoJ will lower its NIRP, and see a relatively limited adjustment to its bond-buying program.

A Bloomberg Survey of Japanese analysts was split on their views for the 21 September BoJ policy meeting.  The survey was taken from 7-12 September, after the recent speeches by the BoJ Governor and Deputy, but ahead of the press reports out in the last day that appear to be aimed at massaging expectations towards building in operation reverse twist.

The survey found that only a 23 out of 43 anticipated any policy easing.  The survey didn’t even seem to ask analysts to respond to a possible shortening in duration or lessening of longer-term bond purchases.

The survey found that only around half expected a rate cut, and some thought that a cut would be delivered at a later date, rather than next week.  It does not appear that the market is well prepared for a rate cut or a lessening of long-term bond purchases.

Uncertainty remains high

The JPY and Japanese markets have been very erratic and increasingly so ahead of recent BoJ policy meetings, fueling a sense of high uncertainty. Indeed, the BoJ has tended to disappoint expectations of further policy easing since 29 January when it introduced its NIRP.  The recent speeches by Kuroda and Nakaso and news media reports channeling insiders may be an attempt to reduce this uncertainty.”