### As the 1-year anniversary of the BoJ's.....>

JGBS: ### As the 1-year anniversary of the BoJ's YCC programme approaches

(ironically, considering the amount they are printing, this is the paper

anniversary) there have been questions about sustainability stemming from the

difficulty the BoJ had in stopping yield declines amid a global safe haven bout

as markets were roiled by US/North Korea brinkmanship. The 10-Year dropped to

-0.015%, compared to the target of 0.00%, despite the BoJ cutting purchases in

this maturity three times in a month. >> POV: Fluctuations in yields, &

resultant changes in purchases, could actually be a good thing for the BoJ. The

point of YCC is that BoJ could be flexible and control yields to offer more

certainty to investors. A reduction in purchases doesn't mean that the bank

can't increase further down the line, & lower purchases allow them to keep

powder dry in terms of a smaller B/S for when yields need to be contained. At

these negative levels there is reduced demand from domestic players (apart from

to sell to the BoJ, which becomes a self fulfilling prophecy if purchases are

reduced). There are, however, risks from foreign flows into JGB's below the

BoJ's floor - foreigners bought a net Y3.063tln of JGB's in the past 6-weeks.