BOJ tells markets to go jump

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Macro Afternoon

Nobody does QE like the BOJ. For me this is a race not between the BOJ and inflation but between the BOJ and the global bust that will trigger a massive JPY bid. Pantheon with the note.

The BoJ stuck to its guns on Friday, making no changes to policy, and claiming that no changes were even being contemplated. Policy remains focused on the challenges facing the real economy, rather than financial variables, and Governor Kuroda warned that a tightening of policy risked an economic contraction. There is little prospect of a change in policy this year. Speculation had built ahead of the meeting that a change might be afoot. Yen weakness has been pronounced in recent months, prompting a joint statement by the MoF and BoJ. A key driver of yen weakness has been the widening yield differential between Japan and the rest of the world, particularly the U.S. Following a spate of hikes—some larger than expected—by other major central banks, some market  participants had started to bet that the BoJ would capitulate on yield curve control, and widen the band.

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