11 Jun 2013
Flash: Will BoJ Kuroda lift expectations again? - Nomura
FXstreet.com (Barcelona) - The BOJ monetary policy decision will be released in a few hours from now, and according to Yujiro Goto, FX strategist at Nomura, the BOJ is likely to consider extending the maturity of fixed rate fund supply operations against pooled collateral to 2-3yrs from 1yr, an idea first discussed at the meeting with JGB investors.
Goto thinks that by providing money for three years at fixed rate, "it can imply the BOJ is going to keep its zero interest rate policy for three years, potentially increasing the policy duration effect" Goto said.
However, "it is unlikely for the Governor Kuroda will back off his commitment to achieve 2% inflation in two years, at this point, thus, not clear whether policy duration effect can be strengthened or not" Goto added.
If volatility in JGB market gets reduced, it will be positive for Japanese equities and the USDJPY, Goto said, "as the broad based spike of JGB yields on May 23 to 1.0% was one of the reasons for the start of corrections" the strategist concluded.
Goto thinks that by providing money for three years at fixed rate, "it can imply the BOJ is going to keep its zero interest rate policy for three years, potentially increasing the policy duration effect" Goto said.
However, "it is unlikely for the Governor Kuroda will back off his commitment to achieve 2% inflation in two years, at this point, thus, not clear whether policy duration effect can be strengthened or not" Goto added.
If volatility in JGB market gets reduced, it will be positive for Japanese equities and the USDJPY, Goto said, "as the broad based spike of JGB yields on May 23 to 1.0% was one of the reasons for the start of corrections" the strategist concluded.