Futures Pressured By BoJ Review Talk, Curve Twist Flattens

Friday’s focus has squarely fallen on comments from BoJ board member Tamura , who has called for a review of the BoJ’s monetary policy framework.

• Tamura stressed that the move “should come at the right time” and was non-committal re: the potential for policy tweaks post-review, pointing to situations whereby tweaks may or may not be required.
• This was the second such instance of tweak discussion in 2 days after BoJ board member Noguchi pointed to a data-dependent stance, albeit with no expectations of policy tweaks in the immediate term, alongside a need for continued monetary easing on Thursday.
• This dominated any secondary headline flow, with a below-/in-line-with-average round of offer/cover ratios at the latest round of BoJ Rinban operations noted, perhaps supporting the longer end of the curve.
• JGB futures are -11 into the bell as a result, more than unwinding their overnight bid. The curve has twist flattened, pivoting around 10s, with the major benchmarks sitting 1bp cheaper to 2bp richer, as 7s lead the weakness owing to the cheapening in futures.
• Elsewhere, BoJ Deputy Governor Amamiya outlined the BoJ’s accounting framework re: JGB holdings in front of parliament, while stressing that any paper losses incurred on its holdings will not impact the Bank’s ability to conduct monetary policy.
• We also heard from BoJ Governor Kuroda, who reiterated already heavily-discussed points re: the Japanese economic outlook.
• There isn’t much of note on the domestic docket on Monday.