Wednesday, September 21, 2016

Analysts Weigh In On The Bank of Japan

From Barron's Asia Stocks to Watch:

UPDATE BoJ Shifts To Yield Curve Control: Analysts React
The Bank of Japan kept its interest rate unchanged at negative 0.1% and said it would now focus on “yield curve control” by continuing the purchase of Japanese government bond yields until the 10-year bond yield is kept “at around zero percent”. 
The BoJ wants to have more policy flexibility, shift to forward guidance and unwind damages done earlier this year, analysts say. 
Citi Research‘s FX strategist Todd Elmer wrote:
My initial take on the BoJ outcome is that this is an effort to use forward guidance more actively, such as what we have seen from other central banks. The implication is that the BoJ is affording itself additional freedom to shape the yield curve and it is voicing that this is an explicit aim, as well as additional freedom to maintain the current policy track indefinitely… Since heavier use of forward guidance has a checkered track record in providing sÄ•mulus for other economies, the market may in time question the likely effectiveness of this shift in the framework. 
National Bank of Australia‘s Ray Attrill wrote:
To the extent that the initial move to negative rates in January and subsequent curve flattening crushed banking stocks, the broader stock market and induced risk-negative yen strengthening, today’s moves can be viewed as an attempt to partially unwind the cause/effects of those actions. 
The markets are certainly loving it today. The Topix Index soared 2.5%, the biggest one-day move since July, as the BoJ explicitly said it would purchase at least 2.7 trillion yen of ETFs linked to the market-weighted index. The Topix also tilts towards banks and export-oriented auto manufacturers, which are benefiting from BoJ holding fire on negative rates. The Japanese yen fell 0.8% to 102.51 per dollar....MORE
So, What's Going On In Japan?
Bank Of Japan Eases Self-Imposed Restrictions, but Can't Weaken the Yen