Technical Analysis

Ahead of its monetary policy meeting beginning on Tuesday the BOJ to buy JGBs today

The Bank of Japan’s two-day policy meeting begins on Tuesday, 17 January 2023 and concludes on Wednesday. There is no set time for the BOJ statement on Wednesday, the BOJ likes to keep us guessing. You can expect it most likely in the 0230 to 0330 GMT time window (this is 2130 to 2230 US Eastern Time), although I’d be looking for it towards, it not past, that end-time. I expect a lot of discussions to be had at this meeting on the yield curve control program.

At the December meeting the Bank expanded the permitted yield range on 10-year Japanese Government Bonds to +/- 0.5% (from 0.25). The Bank may yet again expand this range (the below zero part of this range is irrelevant) to 0.75bp or even 100bp. There is some speculation that the Bank may abandon the YCC program entirely. A ‘do nothing new’ decision is also a possibility. Anyone who thinks they know for sure what the BOJ will announce is probably kidding themselves:

Anyway, back to today. The BOJ will be in the market buying JGBs again today ahead of the meeting. Yields are being pressured higher, the Bank is intervening in the JGB market, buying them to (try to) control yields (that why its called yield curve control).

As a note, in December 2022 the BOJ set a monthly record for JGBs it bought, at 17.02 tln yen. On Friday (January 13 2023) the BOJ bought just over 5tln yen of JGBs, a one-day record amount, and also clocking up a one-week record (circa 10 tln yen):

and the monthly total is now knocking on the door of setting a new monthly record. If the BOJ buy a similar amount to that bought on Friday it’ll surpass the record set last month. And its only January 16 (i.e. half way through the month).

All these record amounts of JGB buying are helping to fuel speculation the BOJ will abandon YCC at this meeting.

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