– Aggressive BOJ easing beyond market expectations; USDJPY and Nikkei rallied sharply
The BoJ delivered aggressive easing measures at today’s meeting, exceeding market expectations. This provided a boost of more than one big figure to high of 94.34 in USDJPY. The details include merging APP-rinban, raising gross purchase of long-term JGBs to JPY 7tn per month (vs. our expectations at JPY 6tn), doubling holdings of JGB and ETFs in two years, increasing maturity of the JGBs purchase to include all maturities to 40 years, temporarily suspend the bank note rule which previously capped the amount of JGB holdings to the size of bank notes in circulation and most importantly, switching policy target to monetary base from overnight call rate – set a quantitative target on the monetary base to JPY 270tn by end 2014 from JPY 138tn as of end 2012. The quantitative target on monetary base has not been widely expected. Of significance too, decision on new policy target, increasing JGB purchases and risky assets were all made by unanimous vote (against speculation of a dividend board). There was only one dissent (by Kiuchi) on how to characterize the duration of quantitative/quantitative easing. We expect USDJPY to re-test 95.00 on the topside.
Click here to read the full report: FX Daily
BNP Paribas