Despite our insistence that their was nothing new in the BoJ’s loan ceiling hike and lack of QE extension (and Goldman’s ‘this is already priced in’ perspective), it still took the machines that are running USDJPY almost 36 hours to figure it out. USDJPY has retraced the entire 100 pip swing and has broken back below the crucial 102.00 level this morning. Time for some more jawboning about the potential for more QE – even as Kuroda insisted last night to the Diet that the government’s tax hikes occur (if for no other reason to ensure this does not escalate into the ‘monetization miasma’ that they fear the market would believe). Of course, as we approach the US open, we would expect the usual ramp-job to lift stocks.
Remember – as Goldman noted,
As of January 31, the growth-supporting funding facility had provided ¥4 tn (already beyond its planned scale), while the stimulating bank lending facility had provided ¥5 tn for a total of ¥9.16 tn. The bank issued a target for the combined balance of loans to reach ¥18 tn by December 2014 when it announced its quantitative and qualitative easing program on April 4, 2013. With the end-March 2014 deadline for new applications approaching, the BOJ needed in practical terms to extend and expand the two facilities as it announced today in order to meet the end-December target. Today’s facility extension/expansion is already factored into the bank’s monetary base target.
Seems they were right but the market is just slow to ‘get it’