End Times and Current Events
August 15, 2022, 01:16:50 am
Welcome, Guest. Please login or register.

Login with username, password and session length
News: Welcome To End Times and Current Events.
  Home Help Search Gallery Staff List Login Register  

Nikkei Drops Fast After Bank Of Japan Minutes

August 08, 2018, 02:38:10 am suzytr says: Hello, any good churches in the Sacto, CA area, also looking in Reno NV, thanks in advance and God Bless you Smiley
January 29, 2018, 01:21:57 am Christian40 says: It will be interesting to see what happens this year Israel being 70 years as a modern nation may 14 2018
October 17, 2017, 01:25:20 am Christian40 says: It is good to type Mark is here again!  Smiley
October 16, 2017, 03:28:18 am Christian40 says: anyone else thinking that time is accelerating now? it seems im doing days in shorter time now is time being affected in some way?
September 24, 2017, 10:45:16 pm Psalm 51:17 says: The specific rule pertaining to the national anthem is found on pages A62-63 of the league rulebook. It states: “The National Anthem must be played prior to every NFL game, and all players must be on the sideline for the National Anthem. “During the National Anthem, players on the field and bench area should stand at attention, face the flag, hold helmets in their left hand, and refrain from talking. The home team should ensure that the American flag is in good condition. It should be pointed out to players and coaches that we continue to be judged by the public in this area of respect for the flag and our country. Failure to be on the field by the start of the National Anthem may result in discipline, such as fines, suspensions, and/or the forfeiture of draft choice(s) for violations of the above, including first offenses.”
September 20, 2017, 04:32:32 am Christian40 says: "The most popular Hepatitis B vaccine is nothing short of a witch’s brew including aluminum, formaldehyde, yeast, amino acids, and soy. Aluminum is a known neurotoxin that destroys cellular metabolism and function. Hundreds of studies link to the ravaging effects of aluminum. The other proteins and formaldehyde serve to activate the immune system and open up the blood-brain barrier. This is NOT a good thing."
September 19, 2017, 03:59:21 am Christian40 says: bbc international did a video about there street preaching they are good witnesses
September 14, 2017, 08:06:04 am Psalm 51:17 says: bro Mark Hunter on YT has some good, edifying stuff too.
September 14, 2017, 04:31:26 am Christian40 says: i have thought that i'm reaping from past sins then my life has been impacted in ways from having non believers in my ancestry.
September 11, 2017, 06:59:33 am Psalm 51:17 says: The law of reaping and sowing. It's amazing how God's mercy and longsuffering has hovered over America so long. (ie, the infrastructure is very bad here b/c for many years, they were grossly underspent on. 1st Tim 6:10, the god of materialism has its roots firmly in the West) And remember once upon a time ago when shacking up b/w straight couples drew shock awe?

Exodus 20:5  Thou shalt not bow down thyself to them, nor serve them: for I the LORD thy God am a jealous God, visiting the iniquity of the fathers upon the children unto the third and fourth generation of them that hate me;
View Shout History
Pages: [1]   Go Down
Author Topic: Nikkei Drops Fast After Bank Of Japan Minutes  (Read 578 times)
Psalm 51:17
Global Moderator
Hero Member
Offline Offline

Posts: 28357

View Profile
« on: June 13, 2013, 09:03:55 pm »

Nikkei Drops Fast After Bank Of Japan Minutes

After Nikkei futures rose as high as 13,225 earlier (up 6.3% from Thursday's close), they have taken a sharp turn lower following the release of the minutes from the Bank of Japan's May 21-22 policy meeting.

Right now, the Nikkei is trading around 12,995, up *only* 4.4%.

Part of the minutes focuses on the volatility in the Japanese government bond (JGB) market that has spilled into equity and currency markets as well in recent weeks.

In early April, the Bank of Japan launched the largest central bank bond buying program ever (relative to the size of its economy).

The size of the bond purchases the Bank of Japan is making, combined with the infrequent and sporadic nature of the purchase schedule, has overwhelmed the JGB market.

"Although the BoJ's easing measures were aimed at absorbing duration and keeping yields stabilized at low levels,  at this point, all they are doing is injecting volatility into the market ," said BofA Merrill Lynch interest rate strategists Shogo Fujita and Shuichi Ohsaki last month.

Here are the key paragraphs from the minutes:

Members next discussed developments in the bond market. They agreed that the recent rise in long-term interest rates in Japan was attributable to such factors as the increase in U.S. and European long-term interest rates, the rise in Japanese stock prices, and the further depreciation of the yen. A few members noted that, reflecting speculation that the Federal Reserve would reduce the pace of its asset purchases earlier than expected, the responsiveness of U.S. long-term interest rates to economic indicators was increasing, and therefore due attention should be paid to how these developments would affect Japan's long-term interest rates. On this basis, members shared the recognition that the Bank's massive JGB purchases, through the reduction in risk premia, were restraining upward pressure on interest rates that stemmed from an improvement in perceived business conditions and a pick-up in expected inflation rates. Some members added that the effects of compressing risk premia were likely to strengthen as the Bank proceeded with JGB purchases, and therefore it was difficult to expect a surge in long-term interest rates for the time being. Meanwhile, many members pointed out that, if the bond market remained highly volatile, this could increase the amount of interest rate risk incurred by banks and other financial institutions, thereby further boosting sales of JGBs. These members then expressed the opinion that it was appropriate for the Bank to make various operational adjustments, with a view to encouraging the stable formation of long-term interest rates by suppressing an increase in volatility and an excessive rise in interest rates. Some of these members added that, in deciding quantitative and qualitative monetary easing on April 4, the framework for the Bank's JGB purchases was designed to allow for flexible operations; for example, by allowing the average remaining maturity of its JGB purchases to be in the range of about six to eight years. Based on this discussion, members shared the view that, as for JGB purchases, it was important for the Bank to conduct operations flexibly to promote the permeation of policy effects by adjusting -- as necessary -- the parameters of its JGB purchases, such as frequency, pace, and allocation of purchase amounts by maturities, while continuing to carefully monitor developments in the bond market and maintaining a close dialogue with market participants.

With regard to the relationship between the government's fiscal conditions and long-term interest rates, one member noted that it was essential that fiscal discipline be firmly maintained with a view to ensuring stability in the bond market. In relation to this point, a different member said that it was also important for the Bank to continue to explain thoroughly that its JGB purchases were not conducted for the purpose of financing the fiscal deficit.

Meanwhile, some members pointed out that the recent rise in long-term interest rates in Japan might be attributable to the possibility that the expected period for which short-term interest rates remained virtually zero would shorten to some extent, as the rise in stock prices and the depreciation of the yen progressed and positive developments in economic activity and prices came to be observed. One member added that it was not desirable to shorten the policy duration in a premature manner. A few members, including this member, expressed the view that it was vital for the Bank to firmly anchor short-term interest rates at low levels by clearly communicating that it was providing the monetary base on a large scale through various short-term funds-supplying operations, in addition to JGB purchases. A different member noted that the Bank's communication regarding the timing at which the price stability target would be achieved and the time frame for continuing quantitative and qualitative monetary easing might be destabilizing expectations for the bond market, and this in turn seemed to be increasing volatility. This member continued that, if the Bank were to change the expression representing its commitment by stating that the time frame for continuing quantitative and qualitative monetary easing should be restricted to about two years, and that thereafter it would review the monetary easing measures in a flexible manner, this would contribute to the restoration of stability in the bond market.

Click here for the full release >

Fujita and Ohsaki delved into why the BoJ's new bond purchase program was wreaking such havoc in May (emphasis added):

The problems with its purchases are that (1) the large amounts have taken away market liquidity, (2) they have been surrounded with uncertainty because no schedule of operations has been announced, and (3) they are not frequent enough.

A regime of monetary easing large enough to control the market has made the secondary market dysfunctional. The market has changed from being a platform for managing portfolios to being a mechanism for managing JGB inventory in the interim between the MOF's auctions and the BOJ's buying operations. Such an inventory management mechanism cannot function without knowledge of the specific schedule of operations as well as the amounts to be bought in each maturity sector (i.e., of each product type). Now that there is no assurance of liquidity in the secondary market, no institution wants to engage in the inventory management business without knowing the timing and amount of the operations. The hedge market is also becoming less functional, and liquidity in the swap and JGB futures markets is declining. Of course, shifting toward not holding positions is the best inventory management hedge of all.

Morgan Stanley MUFG's  Le Ngoc Nhan and  Miho Ohashi described it similarly.

"While bond dealers normally play an important part  as market stabilizers via risk facilitating and efficient price  discovering, they have been rendered increasingly irrelevant  by the existence of a single big buyer (the central bank) and a  single big seller (the Ministry of Finance), with uncertainty  surrounding the timing of BOJ operations also impeding their  risk-taking capacity," wrote the pair. "This increase in volatility has also  triggered a vicious cycle in which VaR-driven selling by  investors catalyzes further rises in JGB yields."

Clearly, it's got the Bank of Japan's attention.

Report Spam   Logged

Share on Facebook Share on Twitter

Pages: [1]   Go Up
Jump to:  

Powered by EzPortal
Bookmark this site! | Upgrade This Forum
Free SMF Hosting - Create your own Forum

Powered by SMF | SMF © 2016, Simple Machines
Privacy Policy