Don’t count on the Bank of Japan!

Survey Anticipates Bank of Japan to Adjust Monetary Policy This Year

  The latest survey released by Bloomberg this week shows that compared with a month ago, the economists currently expecting the Bank of Japan to adjust its monetary policy this year have sharply halved, and no one expects the Bank of Japan to take action this Friday.

  Of the 47 economists surveyed by Bloomberg, only seven said they expected monetary policy adjustments this year, down from 14 in the March survey. Most economists believe that at least until April 2019 monetary policy will change.

  At last week’s G20 meeting, Bank of Japan Governor Haruhiko Kuroda said that the central bank will continue to maintain accommodative monetary policy given that the Bank of Japan is still far from achieving its price target.

  The Bank of Japan’s Monetary Policy Committee now expects the inflation rate to approach 2% around the fiscal year that began in April 2019. Kuroda also unexpectedly stated on March 2 that the Bank of Japan may consider the details of any exit stimulus policies after that.

  It is worth noting that the two-day policy meeting concluded this Friday would be the first meeting of two new vice presidents of the Bank of Japan, including Wakabe Masumi. Before being nominated to the committee, he repeatedly called for more easing. However, according to Wadabe Masumi’s answer at the congressional confirmation hearing, many economists surveyed expected that his vote this week would be consistent with other members.

  ”I expect the Deputy Governor Tanie Chang to agree with the current policy direction,” said Shihiaka Yuji, chief economist at Mitsubishi UFJ Morgan Stanley. “However, he may ask the Bank of Japan to retain as much as 80 trillion yen in government bond purchases as much as possible, and to correct the current shortage of purchases.”

  Shimanaka refers to the difference between the size of the Bank of Japan’s assets to be purchased each year and the actual purchase size. The Bank of Japan’s stated goal is to increase its holdings of government bonds by $ 742 billion annually, but in the fiscal year ending in March, its balance sheet has only increased by around 50 trillion yen.

Volatility Falls to Multi-Week lows as Stock-Rally Continues

CBOE VIX Volatility Index falls sharply on Thursday.

The CBOE VIX (NYSEARCA:VXX) declined sharply on Thursday, as stocks staged another relief rally on signs of prevailing calm in the geopolitical arena.

 

The Chicago Board Options Exchange (CBOE) Volatility Index declined 8.7% to close at 18.49, its lowest level of the month. The so-called “fear index” traded between 18.16 and 19.92.

 

 

In equities, the S&P 500 Index (NYSEARCA:SPY) gained 0.8% on Thursday.

Major VIX ETFs:

iPath S&P 500 VIX Short Term Futures ETN: (NYSEARCA:VXX) Designed to offer exposure to the S&P 500 VIX Short Term Futures Index Total Return. The Index uses CBOE Volatility Index futures by way of a long position in the first and second-month VIX Futures contracts. VXX declined 4.1%

 

ProShares Short VIX Short-Term Futures (SVXY) to track the inverse daily performance of the S&P 500 VIX Short-Term Futures Index. SVXY advanced 2.1%

 

ProShares UltraShort Term VIX Futures: (NYSEARCA:UVXY) UVXY is designed to deliver 2X (leveraged) returns of the day’s moves in the S&P 500 VIX Short-Term Futures Index. It tacks the two front months of the futures contract. UVXY declined 6.2%. 

 

VelocityShares Daily 2x VIX Short-Term Futures ETN (NYSEARCA:TVIX) TVIX is a leveraged VIX ETN designed to deliver 2X the returns of the daily S&P 500 Short-Term Futures Index. TVIX declined 6.5%.

 

The Final Word: Volatility is back to trading below the historic average, a sign that the bulls are once again controlling the tempo. However, underlying disks tied to geopolitics and free trade continue to threaten the outlook.