Kuroda Backs Away From ETF Comments

Bank of Japan Governor Haruhiko Kuroda told Japanese parliament last night that the BOJ would not be ending its ETF purchases given the current conditions. Coming on the back of the bank’s recent meeting, there has been a lot of speculation that the BOJ was laying the groundwork to begin scaling out of its huge, monthly ETF purchase program. The removal of strict guidance was seen as a way of affording itself room to reduce purchases without drawing attention to the move, a sort of “stealth tapering” as its been referred to.

Kuroda Says 2% Inflation Will Take Time

Kuroda told member of parliament: “We have absolutely no plan to unload our ETF holdings. If we were to do so in the future, we must decide on guidelines at a policy-setting meeting.” Reaffirming the message given during the BOJ meeting, Kuroda continued saying, it will take some time for the Japanese economy to hit the bank’s 2% inflation target. In the meantime, Kuroda advised that easing will remain in place to help support the economy.

Europe Third Wave Fears Weighing on Sentiment

Despite clearly being a positive for stocks, the main Japanese indices have continued lower across the European morning on Wednesday. Both the Nikkei and the Topix are extending the week’s losses as the risk off mood continue to grow. Fresh concerns over the potential third wave of COVID hitting Europe. The risk adverse tone to markets has seen safe haven demand for the Japanese Yen surging higher once more, creating downward pressure on stocks.

Traders Unsettled By ETF Purchase Adjustments

Despite Kuroda’s comments overnight, it seems the market is still reacting to the March BOJ meeting last week. The removal of the bank’s $55 billion annual ETS purchase target is seen as a major blow with traders perhaps sensing that Kuroda’s comments overnight were simply an attempt to soften the blow given that Japanese stocks have been in free fall since. Looking ahead this week, Tokyo core CPI on Friday is the only key data for JPY traders. However, developments in the risk backdrop will be the most important aspect to note with any further negative news out of Europe likely to pull stocks lower in the meantime.

Technical Views

NIKKEI

The sell off in the Nikkei has seen price trading back down to test the 28372.5 level support. This is a key price zone for the index and a break here will confirm the lower high at 304050 opening the way for a much deeper push towards the channel low firstly and the 26949.5 level thereafter.

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