BoJ Chatter To Drive Early Price Action

JGB futures added 13 ticks in the final overnight session of last week, after U.S. Tsys rebounded from session cheaps (see previous bullets more colour on the Tsy move).

• Expect the space to be pressured in early Tokyo trade in lieu of weekend source reports from Kyodo, which noted that the government is set to revise the BoJ agreement that commits the Bank to achieving 2% inflation at “the earliest possible date.” The piece suggested that the new mandate would be more flexible around the 2% goal, which could potentially become a medium- or longer-term target. The matter is expected to be discussed with the new BoJ Governor in April next year, per the report. This will likely feed through into a slightly more hawkish market disposition re: the BoJ (U.S. Tsy futures re a touch softer to start the week, in lieu of this report).
• Reaction to this story should dominate on Monday.
• The latest round of BoJ Rinban operations, covering 1- to 25-Year JGBs, provides the highlight of today’s domestic docket. Slightly further out, Tuesday’s BoJ decision will provide the key domestic risk event of the week, although no monetary policy changes are foreseen (expect our full preview of this event to be published during the London morning).