### POV: MARKET REACTION TO BOJ "TAPERING"....>

JAPAN: ### POV: MARKET REACTION TO BOJ "TAPERING" SEEMS OVERDONE. The Bank of

Japan cut 10-25 Year and 25+ Year JGB purchases by Y10bln each, the announcement

was followed by a sell off in JGB's and significant yen strength. Previously a

reduction in purchases has seen yen weakness based on selling of JGB's resulting

in outflows from Japanese assets. This time though, the move is being perceived

as tapering by the BoJ, while this precipitated a JGB sell off it also

engendered yen strength. Markets are keenly watching for signs of tightening in

monetary policy in global central banks as the Fed embark on a hiking cycle and

the ECB talk reductions in asset purchases. While stronger economic indicators

in Japan coupled with a "tapering" of purchases does have the hallmarks of

tightening, comments from BoJ policymakers would support the theory that these

moves are simply part of their Yield Curve Control (YCC) programme and seek to

steepen the yield curve, especially after the announcement that super long

issuance in FY2018 would be reduced was followed by a bout of flattening.

Inflation is still way below the 2% target, and BoJ policy makers have

continually affirmed their committment to easy policy until the target is hit.