BoJ shifted the focus of policy from the monetary base to the yield curve - BBH

Research Team at BBH, suggests that much of what the Bank of Japan announced today had been largely leaked and while there was a sizeable response in the asset markets, the dollar's knee-jerk gains against the yen were quickly unwound. 

Key Quotes

“The BOJ lifted its self-imposed restrictions on its asset purchases and shifted the focus of policy from the monetary base to the yield curve.  It is not clear that this shift increases the chances of the BOJ reaching its inflation target. 

Going forward it will implement its JPY80 trillion increase in the monetary base more flexibly, and will no longer have an average maturity target.  This produced a dramatic sell-off in JGBs.  Japanese bonds maturing in 1 to 15 years saw their yields jump 20-40 bp.  Longer-dated bonds rose less.  The 20-year yield rose 13 bp, and the 30-year yield increased by a dozen bp.  The 40-year bond yield was practically unchanged. 

The BOJ also indicated it would stick with its JPY6 trillion a year purchases of equity ETFs, but changed the distribution.  It will buy more of the broader Topix.  Many participants had anticipated this, and there had been some outperformance of the Topix and the Nikkei 400 in recent days.  This continued today with the Topix and Nikkei 400 up 2.8% and the Nikkei 250 up almost 2%. 

The dollar initially fell to almost JPY101 before rallying to JPY102.80.  However, the enthusiasm was not sustained and the greenback eased back to JPY101.60.  It has been confined to about a 30 tick range in the European morning. 

Most Asian equity markets were higher, led by Japan.  The MSCI Asia-Pacific Index rose 1.4%, the biggest gain in two months.  European markets are also higher, with the Dow Jones Stoxx 600 up 0.6% in late-morning turnover.  Financials and telecoms are outperforming.”