Breakfast Bites - The BoJ got spooked

Rise and shine everyone.

Markets are hanging in there, and the BoJ may have helped things along.

The Bank of Japan got spooked.

Deputy Governor Uchida announced that there would be no rate hikes if the markets were unstable.

I can't imagine why. The biggest exporters and banks took the biggest hits on Monday!

He said the catalyst for the strong JPY move was the US Growth outlook, amplified by the BoJ hike. (Hmmm)

Apparently, the Yen has strengthened enough here that the risk of inflation overshoot has been reduced.

Oh but wait, now the Yen decides to go the other way. So volatility still persists, but the movement is in the “right” direction.

This whole thing started with the BoJ stepping in to defend the currency. I doubt they can confirm at this stage that they won’t hike again. But, volatility is likely to persist.

The BoJ has also announced their first round of bond purchases post the recent taper decision. It's in line with the JPY 400B reduction, with the highest reduction (JPY 200B) in the belly of the curve (3Y-5Y), meaning they are trying to leave long-term rates alone, for now.

All of this could now lead to the narrative that the Fed will blink. I doubt that will be the case. The data still doesn’t suggest so.

I was also on Bloomberg this morning. Here’s a short clip ⤵️

Correction Is Healthy, Markets Due a Rebalancing, MacroVisor Says

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