BoJ passes up yet another opportunity to come clean on soft taper - Westpac

The BoJ passed up yet another opportunity to come clean on its ‘soft taper’ when it again argued that it will conduct JGB purchases at ‘more or less’ ¥80tn per year, explains Robert Rennie, Research Analyst at Westpac.

Key Quotes

“Now the fact that it has not done so since November of last year and is currently buying about half of that total is clearly not seen as a market issue. However, we do see the fact that they will eventually have to confirm their taper as a factor holding USD/JPY back.”

“Bar this, we have stuck with the view that the downside for USD/JPY was limited below 109.50 on the basis that the market was under-pricing the Fed and ongoing strong Japanese buying of foreign markets.”

“However, above 113 it starts to look expensive to us. It will be a long time before the Fed’s taper is felt and long term neutral dots have fallen again. Thus we are neutral at current levels.”