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26 Mar 2013
Forex Flash: Kuroda re-emphasizes his aim to purchase longer-term JGBs - Nomura
FXstreet.com (Barcelona) - Nomura Strategist Yujiro Goto notes that BOJ Governor Kuroda appeared in parliament (lower house) today for the first time since he took office.
He adds that Mr. Kuroda explained the semi-annual report on currency and monetary control‟ to lawmakers and his appearance was also regarded as a step to gaining approval from lawmakers for a new five-year term starting April 9. Goto adds that there were limited new comments from Mr. Kuroda on the monetary policy framework. He writes, “Mr. Kuroda re-emphasized that the BOJ would do whatever it takes to end deflation and that he is keeping two years in mind for achieving the 2% inflation target.” Extended bond maturities of asset purchases and increased long-dated bond purchases were also mentioned too, alongside a prospective scrapping of the banknote rule while combining the Rinban and asset purchasing programs (APP).
Goto feels that these comments are not so different from previous speeches, and he thinks that the following policy options are still likely under the “new BoJ”. Firstly, the BOJ will start buying longer-term JGBs (is 5yr is almost certain, probably longer). Secondly, the BOJ will consider scrapping the banknote rule and combining JGB investment in the APP into the Rinban operation. Third, announce more JGB buying. Open-ended asset purchases will also start earlier than scheduled (2014), though he did not mention this possibility today. Goto feels that although the banknote rule limits the BOJ‟s room for adding long-term JGBs, the Bank has more room to accumulate JGBs after the Bank scraps the rule. He writes, “In fact, the share of the BOJ in JGB market remains lower than the share in the early 2000s.”
He adds that Mr. Kuroda explained the semi-annual report on currency and monetary control‟ to lawmakers and his appearance was also regarded as a step to gaining approval from lawmakers for a new five-year term starting April 9. Goto adds that there were limited new comments from Mr. Kuroda on the monetary policy framework. He writes, “Mr. Kuroda re-emphasized that the BOJ would do whatever it takes to end deflation and that he is keeping two years in mind for achieving the 2% inflation target.” Extended bond maturities of asset purchases and increased long-dated bond purchases were also mentioned too, alongside a prospective scrapping of the banknote rule while combining the Rinban and asset purchasing programs (APP).
Goto feels that these comments are not so different from previous speeches, and he thinks that the following policy options are still likely under the “new BoJ”. Firstly, the BOJ will start buying longer-term JGBs (is 5yr is almost certain, probably longer). Secondly, the BOJ will consider scrapping the banknote rule and combining JGB investment in the APP into the Rinban operation. Third, announce more JGB buying. Open-ended asset purchases will also start earlier than scheduled (2014), though he did not mention this possibility today. Goto feels that although the banknote rule limits the BOJ‟s room for adding long-term JGBs, the Bank has more room to accumulate JGBs after the Bank scraps the rule. He writes, “In fact, the share of the BOJ in JGB market remains lower than the share in the early 2000s.”