Research Team at Rabobank, suggests that the Bank of Japan (BoJ) love shocking the markets. Key Quotes “Back in autumn 2014 they were publicly insistent no more monetary stimulus was needed to achieve their 2% y-o-y CPI target: in a ‘Halloween surprise’ they then increased QE significantly. Likewise, in late-January 2016 the bank assured us CPI was going to hit 2% without further help: then on 29 January they cut interest rates to negative (-0.1%). However, this time it appears the shock has been as much to the Bank as to others. That’s because the market reaction to ‘going negative’ has been anything but positive. Indeed, while the initial response in bond yields was as the BoJ had expected to see (2-year yields dropping to -16 bps, and 10-year yields falling to just 0.10% from 0.23% and then flirting with negative territory) the outcome in USD/JPY was anything but what had been hoped: it plunged from 121.4 to 112.42 over the next few sessions, and now even threatens to test the psychological 110 level, forcing more BoJ action in the form of old-fashioned FX intervention.” For more information, read our latest forex news.