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MNI POLICY: BOJ Wants Stable FX Market To Cut JGB Buying

(MNI) Tokyo
(MNI) TOKYO

The BOJ will wait for the yen to stabalise before reducing JGB buying to avoid rate hike speculation, MNI understands.

The Bank of Japan is concerned the market could interpret any reduction to its Japanese government bond buying programme as an attempt to curb yen weakness and a sign of earlier-than-expected rate hikes, and will hold off plans to shrink its purchases until stability returns to the foreign-exchange market, MNI understands.

The BOJ believes a change to its JGB programme is not connected to economic activity and inflation as the bank will deal with upside risks to these areas through policy hikes via the unsecured overnight call loan rate.

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The Bank of Japan is concerned the market could interpret any reduction to its Japanese government bond buying programme as an attempt to curb yen weakness and a sign of earlier-than-expected rate hikes, and will hold off plans to shrink its purchases until stability returns to the foreign-exchange market, MNI understands.

The BOJ believes a change to its JGB programme is not connected to economic activity and inflation as the bank will deal with upside risks to these areas through policy hikes via the unsecured overnight call loan rate.

Keep reading...Show less