The BoJ took everyone by surprise on Friday

The BoJ took everyone by surprise on Friday. The shock of a ¥30 trillion increase in the pace of long-term government bonds (JBG's) and major portfolio rebalancing from the Government Pension Investment Fund (GPIF) has added a new dimension to the global currency wars. Traders centred the bulk of their buying on the Nikkei. However, given the violent move lower in the JPY, traders also had to hedge out the currency exposure on the position by being long AUD/JPY (if they were Australian clients). Certainly, the vote on further easing was tight. However, history has taught us the BoJ have a history of surprising and they know how to play the market very well, with most expecting this action to materialise in January. The fact they announced such aggressive action on a Friday afternoon saw traders spring into action, but then of course they had the added benefit of knowing European, UK and US traders could give the USD/JPY and Nikkei futures an extra leg higher - which has clearly been the case. (VIEW LINK)