### POV: BoJ TAPERING EXPECTED TO INTENSIFY....>

JGBS: ### POV: BoJ TAPERING EXPECTED TO INTENSIFY. The BoJ's so called "stealth"

tapering has been about as inconspicuous as an elephant in wellington boots. The

reduction in net purchases has been accelerating for the past few months leading

some to assert that the BoJ are seeking to steepen the yield curve. At the

current clip the pace of growth in JGB holdings will hit an annual Y50tln by the

end of Q1 2018, well below the Y80tln target. The BoJ tapering is more likely

due to constraints as opposed to an active strategy to procure a certain

outcome. Inflation is still well below the 2% target and policymakers have

reiterated that easy mon pol is needed for prices to rise, as such the BoJ need

to keep some ammunition to continue purchases until this price level is hit.

Another concern relates to the (eventual) exit from QQE and the costs associated

with interest on current account being higher than yields on holdings of JGB's.

- This form of tapering is a slow process, and the outcome is not altogether

clear. Markets will be buffeted by the competing forces of the flow effect

(higher yields on reduced demand) and the stock effect (while purchases may

decrease the holdings of JGB's still rise and keep yields subdued)