Japanese Stocks Jump, Yen & Bonds Dump As BoJ Tapers Its Bond-Buying Program

As if the market needed something else to spur volatility, The Bank of Japan chose tonight to cut the size of its purchases of 5-to-10 year JGBs (from 450bn to 430bn yen). While yen initially strengthened, it is now tumbling and Japanese stocks absurdly rallying, presumably because yields on the bonds are rising.

So just to clarify - Bank of Japan tapering is causing Treasury selling (10Y +1.5bps), which is pushing the dollar higher, thus sending yen tumbling...

And stocks jumping... Look what you have done Mr Kuroda.

Bloomberg's Mark Cranfield notes that the BoJ's timing coincides with the JGB contract trading near the top end of its range for this year, which suggests net market positioning had been skewed long.

As one veteran trader noted: "this would be the perfectly bad timing to cause a JGB VaR shock: just as Italy and Spain get anti-establishment govs, as Trump declares trade war on the world, and as US payrolls looms."

But on the bright side, he added, "at least we will get some volume in JGB markets tonight."

Interestingly, some analysts see this as a victory for Kuroda - enabling him to tighten policy (normalize bond-buying further), because while bonds fell after the Bank of Japan’s surprise reduction in debt purchases but the limited reaction in the yen may pave the way for more cuts.

”It’s a victory by the BOJ, given the market consensus is that the bank can’t act as long as there’s wariness over yen appreciation. Yet the yen barely budged” and instead weakened.

Naoya Oshikubo, rates strategist at Barclays Securities Japan, said that while there’s still wariness over yen appreciation, excessive risk aversion related to Italy’s political turmoil appears to have abated, which may have played a part in BOJ’s decision to cut.


zpinch small axe Fri, 06/01/2018 - 18:25 Permalink

i wish they would, japanese people have a LOT of patience...they didnt revolt after fukushima now abe is killed article 9 defacto..and nothing...on okinawa/futenma is the only real resistance to power is japan...and then very reasonably...elites still get what they want..shit japan parked live us nukes in its harbors and prolly still does, theyre latent nuclear power, everyone knows this, theyre 3-6 month away from a live real nuclear weapons program 90 days or less, japan has the largest stockpile of nuclear weapons grade PLUTONIUM...put that in your morning pipe and smoke it lolll..im kidding dont smoke PU

In reply to by small axe

Cutter Thu, 05/31/2018 - 22:11 Permalink

Kuroda actually thinks he can keep the 10 year JGB at 3 basis points, while he removes their only buyer, the BOJ.  The guy who called for VaR shock has it right.

The Yen will drop like a rock when in a few days Kuroda is forced to come charging back in, because the 10 year JGB has "surged" to all of 12 basis points.

Just more smoke and mirrors from Kuroda.

Seasmoke Thu, 05/31/2018 - 22:29 Permalink

Why is the Yen weakening against the Dollar ???

I must be an absolute idiot. Every move I see , is positive for Gold and yet nothing ever is.

Let it Go Thu, 05/31/2018 - 23:22 Permalink

I remain amazed  that many people still consider the Japanese yen a "safe haven" currency. This flies in the face of reason. For years many economist have looked at Japans economic path and predicted an economic crisis brought on by the growing debt of its government. The reality is that much like the situation that developed in Greece it is clear that Japan is facing a wall of debt that it will never be able to repay.

The myth promoted by the central banks that a major currency cannot fail is accepted as fact by many people however, the rapid demise of either the yen or the euro is all that will be needed to reveal the truth and remind people everywhere that our system of fiat money is held together only by faith in the system and a prayer. Below is an article making the case the yen is destined to fail.

 http://The Yen And Its Failure To Fail.html

ThankUGartman Fri, 06/01/2018 - 03:05 Permalink

I wish I understand bonds and currency better.  Oh well.  I’m not learning any new tricks now because at first you have to lose money to gain the wisdom to trade smart. And I dun lernd enuf alredy.