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China Repo Rates Rise Friday

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MNI (London)
Repeats Story Initially Transmitted at 01:45 GMT Jul 3/21:45 EST Jul 2
By Hiroshi Inoue
     TOKYO (MNI) - The Bank of Japan increased the upper limit of its monthly
JGB purchases in the 1- to 3-year bucket so as to leave total monthly purchases
across the curve unchanged and not send out messages that could be read by some
as the central bank paring back on its easy policy, therefore sending the yen
higher, MNI understands.
     Having reduced total purchases in both the 3 to 5-year and the 10 to
25-year buckets, the BOJ looked to offset with increased monthly buys at the
front-end of the curve, mainly to avoid misunderstanding of their actions by
overseas investors.
     Officials in charge of monetary policy understand the risk that lowering
the scale of the total bond buying could be misinterpreted by foreign players as
the BOJ intentionally reducing JGB buying, thus triggering a yen rise.
     Late last month, the BOJ cut the upper end of both the 3/5 and 10/25-year
buckets by Y50 billion to Y500 billion and Y250 billion respectively. At the
same time, it increased the upper end of the 1/3-year range to Y500 billion, a
move reflected in Tuesday's operations.
     The BOJ will offer to buy medium- and super long-term JGBs on Wednesday and
a close eye will be kept on how foreign players respond, with their reaction
likely to be a factor in future policy actions and statements
     The BOJ in part amended its forward guidance in April due to feedback from
overseas investors who felt the promise to maintain easy policy "for an extended
period of time" could end quickly after the Japanese government carried out the
consumption tax hike in October.
     The updated guidance said the BOJ intended to keep rates low for an
extended period of time, "at least through around spring 2020", specifically
pointing to the sales tax hike as an event that needed watching.
     In discussions with Bank officials, no Japanese market participants had
expected the easy policy to end straight after the sales tax hike, as there was
a general acceptance that the initial impacts into Q1 2020 would have to be
     But those same officials received less certain responses from overseas
players that easy policy would be maintained, persuading the BOJ to offer
clearer and stronger guidance that it would last into next year at least.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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