BoJ is close to the extremes of its JGB asset purchase program - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that the BoJ outcome, the results of the ‘comprehensive review of monetary policy’ plus Kuroda’s press conference will be the key driver for financial markets with the results of the FOMC meeting etc. coming some 12hrs later.

Key Quotes

“We remain of the view that the BoJ is close to the extremes of its JGB asset purchase program and that it is probably unwilling to open up other asset purchase strategies because of the potential costs involved.

We do expect to see 10bps of NIRP too (i.e. -0.2%), given the extent to which depository corporations are long cash. Thus, given the market’s reaction to NIRP in January, the obvious point to make here is that we should expect to see some pretty violent swings in the ¥ Wed/Thu this week.

With the Fed on hold, the possibility that we see another 12.5/25bps lopped off the longer run dots, the risks are clearly to the downside for $/¥. We target 100, but see it lower.”