Futures Pressured By BoJ Source Report Reiterating Chances Of Review

JGB futures were lower overnight, initially pressured by a BBG source report which alluded to the potential for a BoJ policy review in ’23, per sources, although the report did note that such a move was unlikely to come before Governor Kuroda’s impending departure (scheduled for early April), with the Spring wage negotiations a key input for BoJ policy parameters (already a known).

• The piece suggested that any review may see a move away from the Bank’s existing ultra-dovish framework (with past reviews resulting in a change of policy), but also highlighted that a review could see the existing framework reaffirmed. This comes after the well-documented recent round of comments from both Kuroda, who has highlighted the need for steady policy, and BoJ board member Tamura, who flagged the need for a review when the time is right. The report also noted that the BoJ may not necessarily make a public announcement post-review and could just get on with policy adjustments.
• Initial reaction to the FOMC decision saw JGB futures retest the lows that came on the back of the BBG sources report, before the contract followed U.S. Tsys away from worst levels to close -17.
• 20-Year JGB supply headlines the domestic docket today, with weekly international security flow and monthly trade balance data also due.