BoJ cutting purchases - Rabobank

Analysts at Rabobank note that the BoJ this morning cut back on its purchases of 5 to 10 year paper for a second time this month.

Key Quotes

“Although the market is concerned that the BoJ will run into supply constraints given the huge size of its QQE programme, it is unlikely that this is the cause of the apparent change of tack.  Instead, the BoJ appears to be taking advantage of the decline in market yields towards zero which naturally imply less need for intervention from the central bank.”

“This morning Japanese core CPI inflation registered 0.5% y/y.  While this represents a seventh consecutive gain, there is still a wide gulf between the current level of price pressures and the BoJ’s 2% inflation target.  This suggests BoJ Governor Kuroda is likely to maintain his unwavering commitment to the Bank’s QQE policy.”