BoJ Commences JGB Buying
The Bank of Japan started to implement last week’s policy decision overnight, offering to buy JGBs through the same standardised auction procedure it has used many times before. The size on this occasion was much larger than usual though, which raised the risk that not enough JGB holders would come forward to participate. This could potentially have left the BoJ in the awkward position of being unable to deliver on its bond buying pledges. However, the bond buyback went smoothly and USDJPY was unmoved. The USDJPY positive newsflow continued from other sources however: geopolitical tensions in the Korean peninsula are ongoing; another Japanese corporate announced a large outbound M&A deal; and IMF Chief Lagarde praised the BoJ’s decision to embark on a more aggressive round of QE, noting this ‘welcome step’ would help prop up global economic growth. Lagarde’s remarks should be seen as an international green light for the BoJ to keep its foot firmly on the accelerator, although not all Japan’s trade partners would approve so unreservedly. Elsewhere RBNZ Deputy Governor Spencer sounded increasingly concerned bout booming local house prices, and floated the idea of a possible future rate hike to deal with it, if the boom begins to fuel inflationary pressures more generally.
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