JGB's bid and yen weaker as the BoJ raises....>

JAPAN: JGB's bid and yen weaker as the BoJ raises the purchase of 3-5 Year JGB's

by Y30bln to Y330bln.

- Move is to steepen the yield curve, another tweak under the YCC, the Bank also

taking note of higher yields with 10-Year yield touching the highest level since

July yesterday at 0.096%. This increase in purchases also addresses strength in

yen after the cut to longer purchases earlier in January sparked yen strength

(seeing USD/JPY drop from around 113.00 to around 108.50. The Bank are showing

that they have the dovish walk to back up the dovish talk.

- The short end is seen as the sector with the most favourable supply/demand

dynamics. The BoJ hold around 48% of 1-5 Year JGB's, compared to 61% of 5-10

Year JGB's. As a note the market reaction to this operation has been bigger than

the last fixed rate operation for 10-Year on July 7, which was underwhelming.

The fixed rate op was conducted at 0.11% vs mkt yield of 0.095%.

- USD/JPY has dropped back to 108.92 after hitting a session high of 109.09 post

operation.