With Nikkei 225 down 800 points from post-NIRP highs and USDJPY having almost roundtripped, there is little wonder that Japanese government bond yields are collapsing to imply considerably deeper NIRP to come. With 10Y JGBs on the verge of a negative yield, 2Y yields are now at -17bps (well below Kuroda's -10bps level). Japanese bank stocks are a bloodbath with Nomura leading the way lower.
We're gonna need more NIRP...
- *JAPAN'S TOPIX INDEX FALLS 3.3% TO 1,404.75 AT MORNING CLOSE
- *JAPAN'S NIKKEI 225 FALLS 3.1% TO 17,194.17 AT MORNING CLOSE
And that is what bonds are implying...
- *JAPAN'S 2-YEAR YIELD FALLS TO RECORD MINUS 0.17%
- *JAPAN'S 10-YEAR BOND YIELD FALLS TO RECORD 0.045%
With the entire curve to 8Y below BoJ's -10bps level...
And Japanese bank stocks are plunging...
Led by Nomura's 11%-plus plunge - the most since 2011...
As none other than Nomura itself admits, Further rate cuts likely needed to attain inflation target...
In its newly released Outlook Report, the BOJ is forecasting attainment of its +2% inflation target by FY17 H1. However, we expect the ongoing improvement in the BOJ's preferred measures of the underlying trend in prices–ie, the core-core CPI (headline CPI ex food (except alcoholic beverages) and energy) and headline CPI ex fresh food and energy–to grind to a halt. Additionally, the base wage increases negotiated in this spring's unionized wage negotiations, which BOJ Gov. Haruhiko Kuroda is closely monitoring, look likely to be somewhat restrained. Given such an environment, the BOJ will likely ease again...The BOJ seems to have the latitude to cut its interest on excess reserve (IOER) rate to at least -0.5% or thereabouts.
Wow - that did not take long...
- *KURODA: POSSIBLE TO CUT NEGATIVE RATE FURTHER IF NEEDED
- *KURODA: NO LIMIT TO MONETARY EASING MEASURES
- *KURODA: WILL EXPAND EASING IF NEEDED FOR PRICE TARGET
- *KURODA: BOJ WILL DO WHATEVER IT CAN TO REACH PRICE TARGET
- *KURODA: BOJ TO KEEP LOOKING FOR INNOVATION IN MEASURES
- *KURODA: BOJ NEEDS TO DEVISE NEW TOOLS IF MEASURES INSUFFICIENT
Who could have seen that coming?
Will BOJ cut rates to -0.2% tonight: stay tuned
— zerohedge (@zerohedge) February 2, 2016
"Peter Pan" policy has officially arrived.. .and the market ses straight through it...