Expect more volatility to come in the Japanese government bond market
By now it comes as no surprise that the BOJ is purchasing fewer bonds (tapering) in the market but the fact that they've tweaked the bond-buying plan for three straight months isn't really providing much certainty for traders on what to expect.
Once again, they reduced the frequencies of bond purchases (from 5 days to 4 days) in the one-to-five year maturities but increased the amount it could possibly purchase in each operation.
The move was rumoured earlier in the week here. And although this isn't something that markets tend to react to now, it at least highlights the effort the BOJ is making to enliven the bond market in Japan - even though there hasn't been a massively upbeat reception yet.
The small tweaks are aimed to let investors trade Japanese government bonds as a function of markets and not just purchase them during auctions only to sell them back to the BOJ during the central bank's bond-buying operations.
In my view, they are doing the right thing in trying to eliminate the so called "BOJ trade". But in constantly tweaking their bond-buying plan, it's going to serve to introduce more volatility than it will help to allow markets to gradually work towards steepening the yield curve.
And that's something the BOJ will have to be a little more careful with dealing moving forward.