The Japanese Ministry of Finance are...........>

JGBS: The Japanese Ministry of Finance are planning to cut their issuance for

FY2018 according to MNI sources, the MOF had already signalled their intention

to reduce purchases in the long end but now it seems they will cut sizes

issuance size across maturities. The previous reports from the MOF meeting with

primary dealers that long end issuance would be reduced saw the yield curve

flatten markedly, however comments by Kuroda alerted the market to the negative

effects of QE and opened the door for a change in the YCC target.

- The reduced issance will mean that the BoJ's purchase programme has increased

impact due to the stock effect. While the BoJ are expected to increase enhanced

liquidity auctions for off the run issues in order to maintain liquidity in

JGB's, purchases will likely be reduced alongside issuance and the YCC target

adjusted. At their November meeting the Bank noted "as the BOJ continues to

conduct JGB purchases at around the current pace, the long-term interest rates

will decline further through the stock effect of the BOJ's increasing holdings

of assets. With this in mind, the amount of JGB purchases will need to be

adjusted so that the interest rates remain at the target level."