Bank of Japan decided to decrease the amount of buying Japanese Government Bonds.

Short Comment

Bank of Japan, central bank in Japan, has been one of the most impactful institutions in global financial markets with its huge Quantitative Easing policy. As one of the essential parts of Abenomics, the institution has supported Japanese government's policy of weak Yen by providing the currency to the markets directly. Some participants were suggesting that the institution would expand its provision on coming meetings. Recent trade-war between the US and the rest of the world made safe assets including Japanese Yen bullish.

The institution's decision was breaking the expectation, but not that much. It announced that the amount of buying JGB having maturities between 5year and 10year will decrease to ¥400billion from ¥450billion. Value of Japanese Yen and Yields of JGBs went up a little yesterday, but the degrees of the rise were marginal. In fact, market movements in normal days could make that.

The change of the amount could be relevant with the government's diplomatic position. Recently, Abe Shinze, Prime Minister of Japan, is trying to be the closest friend of US President Donald Trump. Mr. Abe is being attacked with his promise. His said that Japanese companies will buy corns of 2.5million tons from the US. The attackers are suggesting that the decision is based on political and diplomatic side totally, giving everything to the US without a appropriate compensation for it.

Mr. Trump is wanting weak USD and attacking other countries with doubting the manipulation in their currencies inclduing Chinese Renminbi, European Euro, and Japanese Yen. Some researchers are suggesting that Japan could be denominated as exchange rate manipulator by the Department of the Treasury of the US.

Even though the country's economy has a little uncertainty with raising consumption tax, its economic indices are not bad recently. USDJPY is 106 level which is higher than early 2010s' 80 level. He is wanting to get the credibility of Mr. Trump surly while South Korea is losing it with breaking GSOMIA between Korea and Japan and having trouble in negotiation on reward for US army working in the country.

The movements in Japanese assets were marginal yesterday, but it could be meaningful in relative way. Consider 1% rise of NIKKEI225 which could weaken the bonds and the currency. The institution broke the expectation, and the volatility is still proceeding in the global financial markets. I believe that the value of Japanese Yen has additional upside with USDJPY targeting 103. The change of the stance cannot be a main reason for bullish Yen, but it could protect the value of the currency from the recovery of global stock markets.