BoJ Loosens Policy
17/03/10 21:30
Not a perfect storm, but a very good one, as seen in
risk price action the past few sessions. The BoJ
voted unanimously to keep the policy rate unchanged
at 0.1%. In addition, the policy board voted 5-2 in
favour of doubling the ceiling on one 3-month
fixed-rate lending facility, increasing the limit on
the maximum total size of all loans outstanding to ¥
20 tn from ¥ 10 tn previously. Finally, they chose to
allow another 3m loan facility, introduced in 2008 to
expire at the end of March as previously signaled.
The stated reason for the move was to "encourage a decline in longer-term interest rates", although with yields already hovering near the policy rate, the adjustment to the facility is unlikely to have a lasting significant effect, either on front-end yields or on USDJPY. The statement went on to say that the BoJ "will consistently make contributions" to overcome deflation and to return the economy to a "sustainable growth path with price stability"
As the FED buys more time on raising rates and closing out asset purchases and the BoJ continue to struggle to fight deflation, this is a good opportunity to continue with our 'long only" AUDJPY, AUDUSD, NZDJPY and NZDUSD trades. We continue to hold our longs as well as trade the pairs (long only) on an intra-day basis.
Risks to this trade are any material pullback in equities, which is likely in the coming months. Manage your risk effectively.
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