The Central Bank of Japan decided to cut the stock purchase program in an announcement done yesterday. It is because the index of Nikkei225 has been reaching the highest record in 30 years. That decision had an impact in several sectors in the country.
One of them is the Japanese stock exchange which was hit up to -1.4 percent. However, the Yen course is quite stable. When this news was written in the European session, the USD / JPY is still sideways around the level of 108.85.
The situation scale is around JPY 6 trillion per year as apart from the massive monetary stimulus since the year of 2016. The BOJ stock portfolio reached for more than USD 450 billion per 1 of March. That makes it as the biggest single stockholder.
Do a Massive Share Purchase Should be Made?
In fact, some experts thought that the further massive share is not important to do. It is especially in a situation like this. BOJ maintain the stock purchase until JPY 12 per year as the maximum amount. However, the central bank may do an intervention when the market falls.
It means that they will not always buy the shares like before. At the same chance, BOJ also maintain the interest rate reference at the level of -0.1 percent. They do that by increasing the obligation yield different in the YCC policy. BOJ also made a statement.
They said that the Japanese government obligation yield in 10-year tenor will be allowed to fluctuate between -0.25% up to +0.25 %. That range is wider than the JGB 10Y yield target between -2.0 percent up to +2.0 % which is applied before.
It is important to reach the right balance between maintaining the market function and controlling the interest rate by letting that rate to fluctuate until certain levels. The stimulus cut by BOJ this time is barely cared about forex market participant.
Many Parties Predicted the BOJ Decision
It is true that many parties have been predicting that BOJ will erase its share purchasing program. Market is also more focused on the United States yield obligation than from Japan. Besides that, BOJ still maintains its obligation purchase program.
They also maintain the negative interest rate without any tapering plans in the near time. There is not any reasons for dollar – Yen to react to the BOJ assessment result. It is almost in line with the thing reported by the media. It was stated by an analyst.
For dollar – Yen, the change of the US Treasury obligation yield is a more important drive than the JGB yield change. Elsewhere, New Zealand reported the declined economy condition in the last quarter of 2020. That is why; the NZD declined in the market.
The NZD/USD steps back from its highest range in 10 days to the level of 0.7220. Meanwhile, the AUD / NZD is higher for 0.5 percent to the level of 1.0810. Vice versa, the NZ economic data was disappointing. The new Australian report was beyond the expectation.
Why the New Zealand GDP Declined?
The declined New Zealand GDP was happened, although lockdown is not too massive anymore. It is especially for the business activity and domestic travel in the December quarter in 2020. That was worse than the quarter before as stated by the NZ statistic institution.
The report details show various kinds of situations. For about 7 from 16 industries are experiencing that decline. The biggest one is happened on the construction, accommodation, and retail sectors. It is because the government is too strict due to this pandemic.
That decision brings the negative consequences for certain industries. The per industry diversity status maybe will continue at the beginning of this year. That triggers the uncertainty in the New Zealand economic outlook in the future.
