### POV: JGB STEALTH TAPERING SEEMS A..........>

JGBS: ### POV: JGB STEALTH TAPERING SEEMS A REALITY, REDUCED ISSUANCE IN FY2018

LIKELY MEAN STOCK EFFECT WILL WIN OUT. 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). The MOF recently announced their decision to reduce the float of JGB's

for the 8th successive year. The draft budget released earlier this week expects

an increase in tax revenues in 2018 and as such allows for a reduction in JGB

issuance. MNI sources note that the expectation of increased tax receipts is

based on forecasts for strong economic conditions, forecasts from Japan which

are consistently wrong - Japan have been forced to push back forecasts for

hitting their inflation target for the past 4 years. Further complicating the

matter are the staunchly negative views on austerity from Japanese policymakers

despite Japan sitting on one of the highest debt burdens in the world, debt/GDP

ratio is fast approaching 300%. While the government has announced plans next

year to conduct a review of fiscal policy several BoJ members have argued that

mon pol alone cannot fix the economy & supportive fiscal policy is required.