Kuroda Keeps Options Open

The Fed will attract the most attention in the week ahead but the BOJ is the most intriguing central bank. The US dollar was the top performer last week while the New Zealand dollar lagged. CFTC positioning data showed growing bets against the euro and pound.

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Kuroda attended the G20 and spoke to reporters on the weekend. He attempted to walk back comments ruling out helicopter money and made the same point we did last week – there are different definitions of what 'helicopter money' means. At the same time, he said the BOJ didn't discuss helicopter money at all.

The problem is that ruling out 'helicopter money' doesn't rule out any number of monetizing strategist the BOJ could employ.

Other reports now suggest the Japanese government may roll out a 30 trillion yen stimulus package. The rumours in the past two weeks have risen to 20 trillion from 10 trillion and continue to rise.

The weeks ahead are setting up the economic future of Japan and the legacies of Abe and Kuroda. It's a double-barrel all-in bet on fiscal and monetary stimulus. With other global central banks of the same path as Japan, whether it works or not is critical. At the very least, it needs to impress a skeptical market.

Several research notes we've read in the past week have advocated for fighting the BOJ/MOF and the market remains long yen but that's a dangerous bet.

Early in the week, the pound is climbing as fears about the weak PMIs fade. The Asia-Pacific calendar includes Japanese trade balance for June at 2350 GMT. The consensus is for a 11.3% drop in exports y/y and a 20.0% decline in imports.

Commitments of Traders

EUR -100K vs -88K prior JPY +39K vs +48K prior GBP -74K vs -60K prior CHF +4.7K vs +6.7K prior AUD +33K vs +16K prior CAD +17K vs +22K prior NZD +2.2K vs +1.0K prior

Yen longs have quickly scaled back from +64K two weeks ago as the market prepares for the BOJ. Meanwhile, AUD longs have risen by 28K in the past two weeks despite speculation about RBA cuts.