Article / 29 July 2016 at 8:25 GMT

From the Floor: Too big in Japan?

  • BoJ keeps rates stable, does not increase monetary base
  • JP, Japanese government bond yields surge
  • Question remains what will happen on the fiscal side now
  • Amazon beats once again, Saxo equities head bullish on shares


By Clemens Bomsdorf

For those who are into politics, the Democratic party’s convention and the nomination of Hillary Clinton as presidential candidate was the event to watch last night (European time). For those who prefer to focus on markets, however, it was the Bank of Japan’s policy announcement. 

The Japanese central bank was expected to do what it could. What it did, in the end, disappointed markets. Rates were kept stable and the monetary base was not increased. 

“We are seeing the Bank of Japan at its limits,” comments John J Hardy, head of FX strategy at Saxo Bank, adding that this is particularly true when it comes to bond buying at the current levels of fiscal expenditure. 

Edmund Liu from Saxo’s Singapore desk reports that the Nikkei whipsawed while Japanese government bonds tumbled and the JPY surged. The yield on the 10-year Japanese government bond jumped 9.5 basis points to minus 0.18%. 

The key new takeaway is that the Bank of Japan is acknowledging a USD funding liquidity crisis that is being felt globally; the bank doubled its USD loan facility to Japanese companies to $24 billion over four years.

“I am wondering if we are focusing on the wrong thing,” says Hardy, adding that the key question for him concerns the fiscal side of things. 

The 103.00-50 area is important for USDJPY, as is today's close. If USDJPY breaks out to the upside there is the possibility for a significant rally, says Hardy. 

In Europe, the EBA stress test results are due today; 53 banks are taking part and for the first time it will not be said which ones fail. If any bank is to fail, it is Italy's Monte dei Paschi, but rescue efforts/programmes probably exist in some tentative form behind the scenes somewhere. 

The stress test results could be negative for Italy, but none of this is really a surprise, says Saxo equities head Peter Garnry (who has already commented on the Italian banks issue for 

Asking banks to get rid of bad loans in a too-aggressive manner might have a negative impact as well, and as the European economy is improving, the problem might decrease over time anyway. Barclays, for example, beat revenue expectations and Garnry remains bullish there. 
Amazon weekly share price
When it comes to stocks, Amazon once again surprised to the upside as revenues beat expectations when the firm's quarterly results were presented yesterday after the New York market close. The earnings per share result represented a “monster beat”, as Garnry puts it. Amazon's webservice in particular increases its results and is the predominant driver. “You cannot be other than long Amazon,” judges Garnry.

Today a couple of quarterly numbers will be out. “Chevron and Exxon, the biggest energy giants of the US, are to report today and I expect both to beat expectations,” says Garnry. 

 Yesterday's Amazon delivery beat expectations once again. Photo: iStock

Clemens Bomsdorf is consulting editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios 


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