BoJ Comes Out Swinging but NFP Could Soften Impact

New Bank of Japan (BoJ) Governor Haruhiko Kuroda held nothing back, much to the global currency market's surprise, by kicking off his inaugural two-year term with an aggressive new easing program designed to combat more than 15 years of deflation in the world's third-largest economy.

The key measures of the BoJ's “Quantitative and Qualitative Monetary Easing” program include a doubling of bond purchases to 7-trillion yen (US$75b) a month and an expansion of purchases of other assets, including exchange traded funds and real-estate investment trusts. The central bank will end up buying more that +70% of newly issued debt – thereby removing a lot of supply from the market.

The pledge of aggressive buying has caused Japanese Government Bonds (JGB) to rally violently and flatten their yield curve. Surprisingly, the BoJ will buy JGBs up to a maturity of 40 years. The market had only been expecting the central bank to extend out to either the five- or 10-year...