HALISTER1: Any Yen Weakening on BOJ ’Operation Twist’ to Be Short Lived: DB

Any Yen Weakening on BOJ ’Operation Twist’ to Be Short Lived: DB

(Bloomberg) -- Any JPY weakening, as a result of BOJ efforts to steepen the curve, would “almost certainly” wear off quickly, with the currency soon dominated by other factors, Deutsche Bank’s Macro strategist Alan Ruskin writes in a client note.
  • Past price action supports the idea that if BOJ were to pursue an ‘operation twist’ to steepen the JGB yield curve, it will initially slightly weaken JPY and support the Nikkei
    • Since 2009, an average week where the curve twists steeper by 3bps in 2s10s JGBs, this has been associated with a 0.12% depreciation in the JPY TWI
  • Curve manipulation should be seen as “fiddling around the edges”, given impact on the price of money will be negligible and will not change Japan’s growth and inflation profile meaningfully
  • Despite hope the Fed, BOJ were both going to support USD/JPY, the risks are now firmly skewed in the direction of disappointment and stronger yen
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Alan Ruskin (Deutsche Bank AG)

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