Bank of Japan

There is just one phrase to explain the market's reaction to last night's BOJ announcement that it would join the ECB, Sweden, Denmark, and Switzerland into negative territory: stunned shock.

As the WSJ writes, "many investors had anticipated an expansion of the bank’s asset-purchasing program this year, but few expected Japan to join the European Central Bank and central banks of Sweden, Denmark and Switzerland in negative territory on Friday."

It is safe to say that nobody expected the BOJ stunner announced last night, when Kuroda announced that Japan would become the latest country to unleash negative interest rates, for one simple reason: Kuroda himself said Japan would not adopt negative rates just one week ago! However, a few BIS conference calls since then clearly changed the Japanese central banker's mind and as we wrote, and as those who are just waking up are shocked to learn, negative rates are now a reality in Japan.

As reported previously the Bank of Japan, which not even the most optimistic central bank watchers had expected would unleash anything remotely as aggressive to prevent price discovery, stimulate asset prices and boost the exporting of deflation, became the latest central bank who, after a 5 to 4 vote, unleashed the monetary neutron bomb of Negative Interest Rates in the process pulling an anti-Draghi and shocking markets, even if admitting it can no longer boost QE due to previously discussed concerns it would run out of monetizable bonds in the very near future.

Just minutes before The BoJ is due to release its statement, USDJPY and Nikkei 225 went haywire around 2220ET as Nikkei news dropped a headline about NIRP discussions taking place at The BoJ. This is not the BoJ statement but has sparked chaos in Japanese (and all carry trade linked markets). We can only assume this was some well-placed strawman for The BoJ statement enabling Kuroda to get a glimpse of what is possible.

Total chaos broke out ahead of the BoJ Statement...as Nikkei News dropped this headline...