Halister News

(Bloomberg) -- The JGB market will focus on whether the relationship between the Bank of Japan and the government remains status quo or strengthens further after Sunday’s election, says Satoshi Shimamura, head of rates and markets for the investment strategy department at MassMutual Life Insurance Co. in Tokyo.

• BOJ has influence over JGB market via its bond buying operations so views on this policy by govt is key in gauging market impact
  • BOJ Governor Kuroda will likely be summoned to prime minister’s office for consultations before extraordinary Diet session takes hold
• After almost two years of negative rate policy, it’s time focus is put on banks’ role as intermediaries as their average debt duration is about three years
• As FSA scrutinizes banks’ risk management and business operations, questions may arise as to whether govt should continue with this negative rate policy
• BOJ could pay more attention to the negative aspects of the minus rate policy
• Question about negative rate policy may lead to argument for tweaking that policy or steepening the yield curve to boost source of income for banks
• When attention for that issue rises, the 20-year sector is most likely to feel the risk, leaving to a correction to expensiveness in 20-year zone

To contact the reporter on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui