Mon, Apr 15, 2024

JPY: BoJ maintains JGB purchases at previous level

The Bank of Japan said today they are going to buy Japan Government bonds unchanged from the previous offer. 150 billion Yen in 1 year, 375 billion Yen in 1-3 Years, 425 Billion in 3-5 years, 150 billion Yen in 10-25 years. After the rate hike in last month, Buying operations of Bonds is negative for JPY in the market against Rivals.

USDJPY is moving in Ascending Triangle and market has reached resistance area of the pattern

USDJPY is moving in Ascending Triangle and market has reached resistance area of the pattern

On Wednesday, the Bank of Japan (BoJ) made an announcement confirming its decision to maintain the purchase of Japanese Government Bonds (JGBs) at the same level as the previous offer. Specifically, the BoJ’s purchase plan includes 150 billion yen for up to 1-year JGBs, 375 billion yen for one to three-year JGBs, 425 billion yen for three to five-year JGBs, and 150 billion yen for 10 to 25-year JGBs.

JPY: Reasons to buy Japan and the yen post-BOJ’s 17-year hike

The Bank of Japan said today they are going to buy Japan Government bonds unchanged from the previous offer. 150 billion Yen in 1 year, 375 billion Yen in 1-3 Years, 425 Billion in 3-5 years, 150 billion Yen in 10-25 years. After the rate hike in last month, Buying operations of Bonds is negative for JPY in the market against Rivals.

GBPJPY is moving in Ascending channel and market has reached higher low area of the channel

GBPJPY is moving in Ascending channel and market has reached higher low area of the channel

After 17 years, the Bank of Japan (BOJ) has decided to end an era of negative interest rates, marking a monumental shift in Japan’s economic policy landscape. Despite this significant change, Japanese equities are anticipated to continue performing well, supported by the BOJ’s cautious approach to policy normalization. Additionally, long-term structural factors driving Japan’s growth remain intact, further bolstering the investment outlook. With the yen poised for appreciation, an unhedged exposure is recommended.

The BOJ’s decision to terminate negative interest rates reflects ongoing improvements in Japan’s economic conditions, moving away from the era of the “Lost Decades.” Indications of continued improvement are evident, with core CPI consistently meeting or exceeding the 2% target for 23 consecutive months. Moreover, this year’s shunto wage negotiations have resulted in substantial wage hikes, stimulating private consumption and supporting modest economic growth.

Furthermore, the Japanese government has introduced reforms to stimulate investment activity, such as overhauling the Nippon Individual Savings Account (NISA) program to encourage greater investment participation.

Japan interest rate

Despite the normalization of monetary policy, the BOJ’s stance remains supportive of Japanese equities. Policymakers are proceeding cautiously, mindful of potential adverse effects on the economy. Corporate reforms aimed at improving capital efficiency and Japan’s efforts to reclaim its status as a semiconductor powerhouse contribute to the positive investment narrative.

Although a rate hike was expected to strengthen the Japanese yen, its immediate weakening suggests market dynamics at play. However, fundamental factors, such as positive wage and price trends, are expected to support the yen’s appreciation over time, potentially making it one of the top-performing major currencies by the end of the year.

Investors should be aware of key risks, such as Japan’s high public debt, which could impact fiscal stability. Nonetheless, Japan presents a compelling long-term growth story, with our target price for the Nikkei 225 Index indicating significant upside potential. An unhedged exposure is recommended for potentially greater gains, leveraging Japan’s positive outlook and structural growth narrative.

JPY: JGB yields mixed after strong auction, BOJ bond-buying uncertainty

The Bank of Japan said today they are going to buy Japan Government bonds unchanged from the previous offer. 150 billion Yen in 1 year, 375 billion Yen in 1-3 Years, 425 Billion in 3-5 years, 150 billion Yen in 10-25 years. After the rate hike in last month, Buying operations of Bonds is negative for JPY in the market against Rivals.

EURJPY is moving in Ascending channel and market has reached higher low area of the channel

EURJPY is moving in Ascending channel and market has reached higher low area of the channel

On Tuesday, Japanese government bond (JGB) yields showed a mixed trend, influenced by firm demand observed during an auction for 10-year bonds and anticipation surrounding the Bank of Japan’s (BOJ) upcoming bond-buying operation for the fiscal year.

The bid-to-cover ratio at the auction, which measures demand, stood at 3.80, indicating robust demand compared to the previous month’s ratio of 3.24. This positive response was partly attributed to the reduced number of 10-year JGBs issued per month, suggesting an improvement in market supply and demand dynamics, as noted by Ryutaro Kimura, a fixed income strategist at AXA Investment Managers. Additionally, some traders were observed covering short positions during this period.

Following the auction results, the 10-year JGB yield experienced a decline, reaching as low as 0.720% before settling 1.5 basis points (bps) lower at 0.725%.

Japan Data printed at 0.2 Y Y versus 0.1 in May month

Attention now turns to the BOJ’s bond-buying operation scheduled for Wednesday. Investors are keen to observe whether the central bank will adjust its bond purchase amount following recent policy changes, including the termination of negative interest rates and yield curve control. While the BOJ has indicated it will maintain its bond purchases at “broadly the same amount” as before, it has revised the upper bound of its purchase offer range for the April-June period.

A potential reduction in the bond purchase amount during Wednesday’s operation could exert upward pressure on the yield curve. This adjustment would signal a shorter time frame for quantitative tightening, according to insights from AXA Investment Managers’ Kimura.

The BOJ’s extensive bond-buying activities in the past have led to concerns about market liquidity and function. BOJ Governor Kazuo Ueda has acknowledged the need to eventually scale back bond purchases, indicating a potential shift in the central bank’s strategy in the future.


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