Here's a great summary from Citi on everything the Bank of Japan just did

Bank of Japan governor Haruhiko Kuroda (Photo by Ng Han Guan-Pool/Getty Images)

Markets are getting their heads around the September policy announcement from the Bank of Japan.

In another significant development in the modern world of unusual central bank policy, the BoJ signalled its intent to try to control the shape of the Japanese yield curve using targeted purchases of Japanese government bonds (JGBs).

But as has become the norm with the BoJ’s major policy announcements, there was a lot more in play than simply rates and asset purchases. This was a change to the policy framework.

Citi’s FX team issued a note to clients a short time ago, which is a great potted summary of everything the BoJ just announced:

  • Interest rate on excess reserves unchanged at -0.10% (as expected); changes policy framework
  • Gets rid of 7-12 year JGB buying duration
  • To introduce QQE with yield curve control
  • To introduce inflation overshooting commitment
  • Leaves ETF purchases at JPY5.7tn
  • To expand monetary base until inflation is stable above 2%
  • To keep buying wide range of maturities of JGBs
  • Can cut rates further if needed
  • Natural rate of interest rate is around zero
  • Will consider expanding monetary base if needed
  • Negative rates and JGB buying is effective control for yield curve
  • Can cut target level of long term interest rate as an option
  • Can expand asset purchases as an option
  • Reaching inflation stability means 2% on avg over business cycle
  • To expand monetary base until inflation is stable above 2%
  • To keep buying wide range of maturities of JGBs
  • Expect monetary base in Japan to expand to 100% of nominal GDP in slightly over 1 year
  • Further rise in inflation expectations may take time
  • Amount of each ETF buy to be in line with total market value

No wonder it came out almost 90 minutes after the guideline time.

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