'Mysterious' JPY-Selling, Stock-Buying Panic Ensues After Bank Of Japan Leaves Monetary Policy Unchanged

Having disappointed an expectant market by voting overwhelmingly (8-1) to leave monetary policy unchanged, the initial plunge in USDJPY and Japanese stocks has found a mysterious (and massive) JPY seller and Nikkei 225 buyer. USDJPY is now 100 pips and Nikkei 225 500 points above post-BOJ dip lows... because hawkish is the new bullish...

 

Perception is reflexive reality is perception...

 

And if USDJPY is rising, then US equities are rising (Dow Futs +80)

Because...

As we detailed earlier...

The last time The BoJ increased QQE it was a close vote (just 5 to 4) as The Fed ended QE3 and with 16 of the 36 'qualified' economists forecasting additional easing tonight, uncertainty was high going in with USDJPY and NKY drifting lower (and JGB yields rising) as recent data suggests Japan will escape a technical recession (even as household spending slides ever lower) buying Kuroda time (before unleashing his own bazooka). Then, just 25 minutes late, Kuroda unleashed... nothing:

  • *BOJ VOTES 8-1 TO KEEP MONETARY BASE TARGET UNCHANGED
  • *BANK OF JAPAN LEAVES MONETARY POLICY UNCHANGED
  • *BOJ RETAINS PLAN FOR 80T YEN ANNUAL RISE IN MONETARY BASE

It appears Kuroda-san has chosen to wait til December and 'react' to The Fed, even though his inaction may just be the catalyst for keeping The Fed on hold for longer once again. USDJPy tumbled and global stocks are following for now.

The Bank of Japan Statement:

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by an 8-1 majority vote, to set the following guideline for money market operations for the intermeeting period: The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen.

 

2. With regard to the asset purchases, the Bank decided, by an 8-1 majority vote, to continue with the following guidelines:

 

a) The Bank will purchase Japanese government bonds (JGBs) so that their amount outstanding will increase at an annual pace of about 80 trillion yen.  With a view to encouraging a decline in interest rates across the entire yield curve, the Bank will conduct purchases in a flexible manner in accordance with financial market conditions.  The average remaining maturity of the Bank's JGB purchases will be about 7-10 years.

 

b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3 trillion yen and about 90 billion yen respectively. 

 

c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively. 

Japanese stocks and USDJPY were drifting lower in to the statement....and dumped on the NOTHING

 

US equity futures are giving back some of the after-hours gains...

 

And JGB yields were heading higher into the statement... and rose further after The BoJ did nothing...

  • *JGB 10-YR FUTURES DOWN 0.22, SET FOR BIGGEST DROP SINCE AUG.

 

Next up the press conference... to explain how this is really dovish...

Bank will release updated inflation and GDP forecasts at 3:00 p.m. local time, and Governor Haruhiko Kuroda’s press conference will start at 3:30 p.m.

 

Charts: Bloomberg

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