Forex Flash: BoJ policy implementation kicks off smoothly – UBS

FXstreet.com (Barcelona) - The Bank of Japan started to implement last week's policy decision overnight, offering to buy JGBs through the same standardized auction procedure it has used many times before. According to Research Analyst Gareth Berry at UBS, “The size on this occasion was much larger than usual though, which raised the risk that not enough JGB holders would come forward to participate.”

This could potentially have left the BoJ in the awkward position of being unable to deliver on its bond buying pledges. However, the bond buyback went smoothly and the USD/JPY was unmoved. The USD/JPY positive newsflow continued from other sources however: geopolitical tensions in the Korean peninsula are ongoing; another Japanese corporate announced a large outbound M&A deal; and IMF

Chief Lagarde praised the BoJ's decision to embark on a more aggressive round of QE, noting this 'welcome step' would help prop up global economic growth. Lagarde's remarks should be seen as an international green light for the BoJ to keep its foot firmly on the accelerator, although not all Japan's trade partners would approve so unreservedly.