Peter Pan(demonium) Erupts As BoJ "Disappoints", Signals Early End Of NIRP

USDJPY was in full chaos mode ahead of tonight's BOJ statement. With only 5 of 40 economists expecting further actions by Kuroda (and close Abe advisor Hamada suggesting "I think the BOJ wouldn't take further action right now... probably it will be a wise decision," The BoJ decide to stay put - holding rates flat at -10bps, holding QQE buying flat, and maintaining its ETF buying program at expected levels. The biggest surprise though was a language change suggesting the end of NIRP. After 'mixed' results following its NIRP bomb in January, perhaps it is wise to give the 'economy' time to absorb the craziness as Japan's Peter-Pan-ic continues. The initial reaction was weaker Nikkei and stronger JPY.

USDJPY algos were utterly confused by every headline before the release:

 

And then the chaos erupted:

  • *BOJ MAINTAINS MONETARY BASE TARGET AT 80T YEN
  • *BOJ MAINTAINS POLICY BALANCE RATE AT MINUS 0.100%
  • *BOJ:FROM APRIL, ETFS TO INCREASE AT 3.3T YEN ANUALLY AS PLANNED
  • *BOJ SAYS IT NEEDS TO BE MINDFUL OF RISK TO PRICE TREND
  • *BOJ'S BOARD VOTES 7-2 TO KEEP NEGATIVE RATE UNCHANGED
  • *BOJ CITES RISKS TO DELAY IN CHANGING DEFLATIONARY MINDSET

So nothing for now - more is always possible - and the board is split. Of course while expectations were for no change (from economists) the market seems disappointed...

 

The bigggest surprise, however, was:

  • BOJ REMOVES LANGUAGE FROM ITS STATEMENT THAT IT WILL CUT INTEREST RATES FURTHER INTO NEGATIVE TERRITORY IF JUDGED NECESSARY
  • KIUCHI SAID NEGATIVE RATES IMPAIR FUNCTION OF FINANCIAL MARKETS
  • BOJ'S KIUCHI SAID NEGATIVE RATES IMPAIR JGB MARKET STABILITY

which sparked more chaos...

*  *  *

Since Kuroda unleashed NIRP, things have been mixed...

Stocks are 'just' unchanged, JPY is stronger...

 

But the good news is yields have collapsed...

 

Bear in mind, this is the central bank that conjured the concept of Peter Pan to represent its efforts:

I trust that many of you are familiar with the story of Peter Pan, in which it says, "the moment you doubt whether you can fly, you cease forever to be able to do it." Yes, what we need is a positive attitude and conviction.

In other words - you have to believe to receive - or the entire ponzi collapses.

Perhaps alternative forms of stimulation are required:

 

Charts: Bloomberg