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Reuters reported o/n that the BoJ is set to loosen its grip on YCC to allow long term yields to rise.
JGB futures gapped lower on this.
If true, then the BoJ's YCC will have morphed into a de-facto floor on long end rates, versus its original intension of being a cap. 1/
JGB futures gapped lower on this.
If true, then the BoJ's YCC will have morphed into a de-facto floor on long end rates, versus its original intension of being a cap. 1/
Pressure appears to be growing on policy officials to arrest the decline in bank profitability.
But for all the talk of the "cost" of the BoJ's NIRP, it should be noted that the vast majority of bank reserves are excluded the BoJ's negative policy rate. 2/
But for all the talk of the "cost" of the BoJ's NIRP, it should be noted that the vast majority of bank reserves are excluded the BoJ's negative policy rate. 2/
And yet JP bank profitability & share performance have continued to languish. Japanese banks (and arguably European as well) have been perhaps the biggest value trap for investors over the past ~10 years. 3/
So it appears the BoJ may shift its focus more squarely on targeting higher longer term rates to improve bank margins
How the BoJ intends to communicate this shift w/o signaling tighter policy will be an difficult needle to thread... 4/
How the BoJ intends to communicate this shift w/o signaling tighter policy will be an difficult needle to thread... 4/
Japan real interest rates were already increasing due to the decline in JP HH inflation expectations & core inflation.
A shift towards an asymmetric YCC framework, which seeks higher LT rates, will only aggravate this trend. 5/
A shift towards an asymmetric YCC framework, which seeks higher LT rates, will only aggravate this trend. 5/
W/ this backdrop, its hard to see how the Yen does not strengthen from current levels.
The Yen is "cheap" on every valuation metric out there and the BoJ looks set to alter their policy framework in a less dovish direction. This is an ideal macro setup for ccy strength imo
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The Yen is "cheap" on every valuation metric out there and the BoJ looks set to alter their policy framework in a less dovish direction. This is an ideal macro setup for ccy strength imo
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