Michael Moen, fixed income investment manager for Aberdeen Asset Management Asia, also does not expect any material impact on the firm’s portfolios.
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“But it’s not clear how they are going to review it, creating a huge uncertainty for markets”.
“Investors had been lulled into believing that interest rates would stay low or decline further and bought long-term corporate notes”, said Toshiyasu Ohashi, the chief credit analyst at Daiwa.
The Bank of Japan’s review of its monetary stimulus programme promised for September has revived expectations it could adopt some form of “helicopter money”, printing money for government spending to spur inflation.
Elsewhere, China’s Shanghai Composite came back from early losses to end 0.1% higher, amid hopes of further stimulus measures. It was still on track to rise roughly 10 basis points this week, the most in three years.
Currency traders had been anticipating a more definite move, and conveyed their disapproval by driving the USD/JPY pair down to 102 by the end of Friday’s session in NY, while bond dealers pushed the yield on Japan’s ten year government bond higher from -0.28 percent to -0.18 percent.
More exchange-traded funds will be acquired, however, there was no shift to the deposit rate nor the government bond buying program. Overall confidence in the U.S. outlook improved slightly, which helped support the United States currency, and the S&P 500 index edged higher on the day.
“Some members agreed that, while effects of the negative interest rate policy already had been seen…, the bank needed to examine the extent of the spread of policy effects to the real economy, and thus it should continue with the current monetary policy”, the minutes said.
Overnight indexed swaps have nearly completely priced out a chance of a rate cut in the coming few months.
It was last at minus 0.15 per cent, up 8 bps on the day. Those figures don’t include subordinated bonds, whether long-term or perpetual notes, mainly from financial institutions, which rose to 19 issues this year from six for all 2015. It said it would increase ETF purchases so their outstanding amounts would increase at an annual pace of 6 trillion yen, from 3.3 trillion yen earlier.
“The BOJ has been a source of market volatility”.
Goldman estimates the BoJ will need to buy about ¥115 trillion ($US1.14 trillion) to ¥120 trillion of JGBs, or as much as 50 per cent more than planned, to keep the monetary base expanding amid redemptions.
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“If that happens, the 10-year yield is likely to return to the positive territory”, she added.
