Halister News

(Bloomberg) -- B0J’s yield targeting risks less bond purchases in the future, which would reduce global liquidity and spur Japanese investors to buy less foreign assets, JPMorgan analysts including Nikolaos Panigirtzoglou write in note.

• New policy could lead to slower pace of QE purchases in the future if BOJ thinks it can achieve its yield target with less bond buying
• If the markets were to test B0J’s tolerance by pushing the 10Y JGB yield to well below its 0% target, it’s even possible BOJ would be forced to sell bonds
• Less QE would imply lower liquidity in the global financial system and less support for asset prices
• Though if the new BOJ program is deemed successful, it could be followed by other central banks such as the ECB, which is also facing capacity constraints with its own QE program
• NOTE: Central bank taper risk has $168b manager trimming bonds