BOJ Review: Lower for longer with a bit more volatility – Nomura

Analysts at Nomura explain that the BOJ sent a clear message to the market: lower for longer with a bit more volatility and as Nomura expected, the BOJ decided to allow for a wider trading range around the 0% 10yr yield target, but communications in other areas remained fairly dovish.

Key Quotes

“The introduction of new forward guidance appeared especially dovish in keeping JGB yields low. As Governor Kuroda communicated the new trading range more clearly than we expected, there appears to be little uncertainty on the new policy framework.”

“In rate market, considering the BOJ's forward guidance and short cover demand for 10yr JGBs, we believe the 10yr auction on 1 August will be well received and 10yr yields will stay below 0.1%.”

“During a quieter summer, JPY should remain weak relative to other major currencies. For equity market, the actual pace of ETF purchases under the increased flexibility will be important.”