M&G: Negative Zinsen in Japan

• At the Bank of Japan (‘BoJ’) meeting earlier today the committee surprised markets by implementing further monetary easing via it’s updated “quantitative and qualitative monetary easing with a negative interest rate” policy. Alongside the BoJ’s current annual QQE purchases of JPY80trn, a three-tier system will now be adopted for private financial institution current accounts (basic balance, macro add-on balance, and policy-rate balance) held with the BoJ, with a negative interest rate of -0.1% applied to the policy-rate balance.

• This move has been supportive of Japanese government bonds, alongside European government bonds which have also adopted negative rate regimes (the ECB extended its deposit rate cut from -0.2% to -0.3% in December). Off the back of today’s news,  2yr Japanese, German and French bond yields have all hit new lows, rallying to -0.09%, -0.48% and 0.65% respectively. 

• The adoption of negative rates has two objectives. Firstly, to deepen the BoJ’s resolve in stimulating inflation (the 2% yoy target date has now been extended  from the second half of this year, to mid-2017) and secondly, to halt the recent trend of JPY appreciation.

• With respect to the currency, the US dollar had been depreciating versus the Japanese Yen towards the end of last year, from a USDJPY high of 123.64 in November, down to 116.94 last week.  This trend was reversed today off the back of the announcement, in line with the BoJ’s objectives, with downward pressure on the Yen and USDJPY rallying to 120. This may continue to alleviate appreciation pressures on the JPY over the coming weeks. 

• Given however that the three-tier negative rate system is unlikely to start to have an effect on bank profits until mid-2016, the inflation target is likely to continue to disappoint in the near term and upward pressure on USDJPY may well subside. 

• The BoJ surprise decision comes at a time when speculative positioning has moved towards to an increase in long positions in the Japanese Yen in recent weeks.  At this time, we moved to reduced our long Japanese Yen position, taking some profits on this, though continue to believe that the Yen remains undervalued on a purchasing power parity basis. Furthermore, given the Yen’s perception as a safe-haven currency, a reversal of today’s currency move could potentially occur in “risk-off” periods such as global concerns reigniting around China or US recession fears continuing to deepen.

Bitte beachten Sie, dass es sich hierbei um Archivinformationen handelt. Sie sind nicht als aktuelle Ansichten oder Einschätzungen, sondern nur als historische Angaben zu verstehen.