USDJPY: BOJ IN FOCUS - G20 KURODA & REUTERS ANALYST EXPECTATIONS
已更新
28/29th June BOJ Meeting Expectations by 27 analysts polled by Reuters:
1. 23/27 (85%) expect easing from the BOJ.
- The Median Analyst expect a 10bps cut to the headline interest rate to -0.2% and a Yen10TRN Extenstion to the BOJ's monetary base target to Yen90TRN a month (JGB and ETF Purchases).
- One analyst expects easing in September, two in October and One sometime next Year.
2. Whilst the Median view is 10bps and 10trn extension, further to the right of the easing curve we observe some top investment banks expecting a more with GS forecasting a 20bps cut and an extension to the Monetary base from somewhere between Yen10-20TRN
My View:
1. I am concur with those views further to the right of the easing curve - i expect BOJ to deliver 20bps and 10-20trn increase in monthly JGB/ EFT Purchases as the stagnant inflation situation (-0.4%National/ -0.5%Tokyo) requires
some aggressive policy.
- Reason for this thinking is that currently the Monetary base has been steady at Yen80trn for some time and the rate has been at -0.10% since January - so realistically is a 10trn increase and 10bps decrease going to be sufficient?
- Lets look at the maths - a 10trn increase is 12.5% and a 10bps drop takes us to -0.2% - personally i do not think a 12.5% increase and a slight adjustment to the key rate will bring JPY underlying inflation into a uptrend - if 80trn and -10bps can't, i dont think 90trn and -20bps can - they need more e.g. 100trn and -30bps - a 25% increase in monthly monetary base + a significant decrease in the interest rate - bare in mind that the SNB has rates at -0.75% so the BOJ has a lot of room relatively to cut futher, it's not like its on the edge of economic possibility already when other central banks are already more aggressive.
2. Now whether they will deliver to the right/ aggressive side is up for question, as BOJ/ Kuroda have always been on the conservative side. Though in recent times the BOJ have come under-pressure by JPY Govt/ Abe so imo if they will ever deliver big - it will be now.
- Kuroda shrugged off heli money (below) but he did communicate that there could/ should be a double effort from monetary and fiscal policy in order to increase the multiplier effect - which bodes well - we could see dramatic fiscal and monetary policy. Even if we fall short of cash dropping out of aircraft.
Kuroda's comments at G20:
- "Bank of Japan Governor Haruhiko Kuroda said on Saturday he would ease policy further if necessary to achieve its 2 percent inflation goal, while reiterating a commitment to continue with the current stimulus until prices are anchored there."
- "If the economy's (recovery) trend continues, leading wages and prices to rise in a virtuous cycle, which is continuing, prices will eventually rise to the 2 percent price stability goal,"
- "We always examine risk factors for the economy and prices and will take additional easing steps if necessary to achieve the price stability goal. I'll explain that together with Japan's economy, prices and monetary policy at this meeting."
- "Uncertainty will continue, including negotiations between Britain and the EU, which will take years. So we will be paying attention to such things,"
- "If it means that central banks are directly underwriting government bonds, or managing monetary and fiscal policies as one, that would be prohibited in Japan as well as other advanced economies, as lessons from history tell us,"
- "If governments utilize fiscal policy while central banks ease policy from the economic and price viewpoint, that would boost the multiplier effect on the economy. This so-called policy mix is nothing wrong as macro policy.
1. 23/27 (85%) expect easing from the BOJ.
- The Median Analyst expect a 10bps cut to the headline interest rate to -0.2% and a Yen10TRN Extenstion to the BOJ's monetary base target to Yen90TRN a month (JGB and ETF Purchases).
- One analyst expects easing in September, two in October and One sometime next Year.
2. Whilst the Median view is 10bps and 10trn extension, further to the right of the easing curve we observe some top investment banks expecting a more with GS forecasting a 20bps cut and an extension to the Monetary base from somewhere between Yen10-20TRN
My View:
1. I am concur with those views further to the right of the easing curve - i expect BOJ to deliver 20bps and 10-20trn increase in monthly JGB/ EFT Purchases as the stagnant inflation situation (-0.4%National/ -0.5%Tokyo) requires
some aggressive policy.
- Reason for this thinking is that currently the Monetary base has been steady at Yen80trn for some time and the rate has been at -0.10% since January - so realistically is a 10trn increase and 10bps decrease going to be sufficient?
- Lets look at the maths - a 10trn increase is 12.5% and a 10bps drop takes us to -0.2% - personally i do not think a 12.5% increase and a slight adjustment to the key rate will bring JPY underlying inflation into a uptrend - if 80trn and -10bps can't, i dont think 90trn and -20bps can - they need more e.g. 100trn and -30bps - a 25% increase in monthly monetary base + a significant decrease in the interest rate - bare in mind that the SNB has rates at -0.75% so the BOJ has a lot of room relatively to cut futher, it's not like its on the edge of economic possibility already when other central banks are already more aggressive.
2. Now whether they will deliver to the right/ aggressive side is up for question, as BOJ/ Kuroda have always been on the conservative side. Though in recent times the BOJ have come under-pressure by JPY Govt/ Abe so imo if they will ever deliver big - it will be now.
- Kuroda shrugged off heli money (below) but he did communicate that there could/ should be a double effort from monetary and fiscal policy in order to increase the multiplier effect - which bodes well - we could see dramatic fiscal and monetary policy. Even if we fall short of cash dropping out of aircraft.
Kuroda's comments at G20:
- "Bank of Japan Governor Haruhiko Kuroda said on Saturday he would ease policy further if necessary to achieve its 2 percent inflation goal, while reiterating a commitment to continue with the current stimulus until prices are anchored there."
- "If the economy's (recovery) trend continues, leading wages and prices to rise in a virtuous cycle, which is continuing, prices will eventually rise to the 2 percent price stability goal,"
- "We always examine risk factors for the economy and prices and will take additional easing steps if necessary to achieve the price stability goal. I'll explain that together with Japan's economy, prices and monetary policy at this meeting."
- "Uncertainty will continue, including negotiations between Britain and the EU, which will take years. So we will be paying attention to such things,"
- "If it means that central banks are directly underwriting government bonds, or managing monetary and fiscal policies as one, that would be prohibited in Japan as well as other advanced economies, as lessons from history tell us,"
- "If governments utilize fiscal policy while central banks ease policy from the economic and price viewpoint, that would boost the multiplier effect on the economy. This so-called policy mix is nothing wrong as macro policy.
註釋
*Trading Strategy*1. Yen currently is a tricky one currently - I personally am going to wait until decision release/ CPI to see what to do e.g. if we get a big delivery I will buy yen at market to 111tp; If BOJ under-delivers, I will sell Yen at market to 102tp.
- Pre-event positioning seems low as yet (although we still have 4 days left) - as we trade flat at the 106 level. If the market thinks the BOJ will over/ under-deliver before hand, we will DEFINITELY see a run to 111 or a pullback to 104 respectively - so keep your eyes out for that.
- IMO as always, likelihoods are skewed to "under-delivery" as most CB are modest at best in recent times, when the bulk of their ammo has been spent - not to mention the BOJ/ Kuroda itself (very conservative, though under the most pressure ever so the time will be now for a surprise) - but if i had to guess now id bet on a selling bias but like i said i will wait for the event.
2. In the broader picture i also expect further risk-sentiment to be a large function of the BOJ - e.g. I expect the current equity bull run we are seeing to be stopped in its tracks if BOJ misses the mark - followed by a strong risk-off bias (e.g. the gold, UST, Yen outperforming trend to begin again); whilst equally, i expect the equity bull run to continue if the BOJ deliver and the bull run to be exacerbated by an over-delivery (even if very unlikely).
註釋
Alternative Easing methods:1. A 10bps decrease in the LSP (Loan Support Programme) from 0% to -0.10% - as well as the 10bps decrease in the Depo rate to -0.20%
2. An increase in ETF purchases from Yen3.3trn to yen7.0trn - as well as a yen10trn increase in JGB monthly purchases to a terminal rate of yen90trn
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