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Jun 3, 2013
Flash: BoJ pledges to increase frequency of JGB purchases – UBS
FXstreet.com (Barcelona) - The Bank of Japan pledged last week to increase the frequency of JGB purchases again to reduce volatility in government bond markets.
According to Research Analyst Gareth Berry at UBS, “Avoiding repeats of the corrections seen in Japanese equities and undue attention to the country's fiscal position – both of which are leading to financial instability – are the main drivers behind such changes.”
However, upon greater introspection and BoJ will probably be even more concerned that barely two months into their QQE program, the efficacy of their policy is at risk of being seriously curtailed. Many of the destabilizing factors are beyond their control, but in terms of expectations management, perhaps they could take a leaf from the ECB's book.
Of course, current standards are certainly different compared to 2012: the JPY had already weakened significantly well before Kuroda's appointment, while the ECB's 'elimination of tail risk' which stabilized the EUR is far more preferable to break-up driven falls in the currency.
According to Research Analyst Gareth Berry at UBS, “Avoiding repeats of the corrections seen in Japanese equities and undue attention to the country's fiscal position – both of which are leading to financial instability – are the main drivers behind such changes.”
However, upon greater introspection and BoJ will probably be even more concerned that barely two months into their QQE program, the efficacy of their policy is at risk of being seriously curtailed. Many of the destabilizing factors are beyond their control, but in terms of expectations management, perhaps they could take a leaf from the ECB's book.
Of course, current standards are certainly different compared to 2012: the JPY had already weakened significantly well before Kuroda's appointment, while the ECB's 'elimination of tail risk' which stabilized the EUR is far more preferable to break-up driven falls in the currency.