Two weeks before a much-anticipated monetary-policy meeting, BOJ Governor Haruhiko Kuroda signaled his readiness to ease further using existing or new tools, but said the central bank should consider the effects of subzero rates when conducting policy.
That's an big turn in the central bank's rhetoric. While Kuroda has long acknowledged negative rates could potentially harm banks, he has been dismissive of the effects - saying they would be outweighed by a faster-growing economy.
More than 100 flights were canceled and evacuation warnings were issued for thousands of people as Typhoon Lionrock approached Japan's northeast, a region devastated by a massive earthquake and tsunami five years ago.
Toyota (NYSE:TM) has suspended production at two of its factories in the storm's path, while Tokyo Electric Power (OTCPK:TKECY) said offshore work would be halted and equipment would be stowed away to prevent accidents.
Recording its biggest one-day gain in three weeks, Japan's Nikkei climbed 2.3% overnight as the yen weakened against the resurgent dollar following comments from Janet Yellen that the case for raising rates was getting stronger.
Adding to pressure on the currency, BOJ Governor Haruhiko Kuroda said at Jackson Hole on Saturday that there was ample space for further easing of monetary policy via QE or by cutting interest rates deeper into negative territory.
According to a draft of a "comprehensive" review of its policies set for release next month, the Bank of Japan will take note of a number of factors - big declines in oil prices, a 2014 sales tax hike, and a deflationary mindset among the populace - as keeping the economy from hitting the bank's 2% inflation target.
In doing so, the BOJ will be defending itself from criticism that its QQE program (quantitative and qualitative easing) has been a failure, and thus signal markets that more of the same is coming.
The leak is important as last month's announcement of a review sent the JGB market to its worst sell-off in three years on fears the central bank might back off from its money-printing.
The yen (NYSEARCA:FXY) has backed off of earlier gains, but remains stronger on the session, with dollar/yen slipping 0.65% to ¥101.20.
Age and ill health could make it difficult for Japanese Emperor Akihito to carry out his official duties, potentially paving the way for his abdication and the most significant change to the imperial system in the postwar era.
In a pre-recorded video message, the Emperor expressed concern that "society comes to a standstill and people lives are impacted in various ways," as his condition becomes serious.
Nearly all the funds being closed have well less than $50M in AUM, the level State Street says is necessary for sustaining an ETF.
The list: $2.7M SPDR MSCI EM Beyond Bric ETF (NYSEARCA:EMBB), $14.7M SPDR BofA EM Corporate Bond ETF (NYSEARCA:EMCD), $26M SPDR Barclays International High Yield Bond ETF (NYSEARCA:IJNK), $2.1M SPDR MSCI EM 50 ETF (NYSEARCA:EMFT), $28M SPDR Russell/Nomura PRIME Japan ETF (NYSEARCA:JPP), $55M SPDR Russell/Nomura Small Cap Japan ETF (NYSEARCA:JSC), $50M SPDR S&P International Mid Cap ETF (NYSEARCA:MDD), $74M SPDR S&P Bric 40 ETF (NYSEARCA:BIK), $60M SPDR Nuveen Barclays Build America Bond ETF (NYSEARCA:BABS), $149M SPDR Nuveen Barclays California Muni Bond ETF (NYSEARCA:CXA), $34M SPDR Nuveen Barclays New York Muni Bond ETF (NYSEARCA:INY), $2M SPDR SSGA Risk Aware ETF (NYSEARCA:RORO).
The last day to trade the funds is Aug. 24. Proceeds from liquidations will be sent on or about Aug. 31.
Despite Japan's massive stimulus program, the Nikkei fell close to 2% today, on lingering disappointment that it did not include more direct government spending which could give an immediate boost to economic growth.
Meanwhile, minutes from the BOJ's June meeting showed uncertainty over the actions being pursued by the central bank, highlighting doubts about the sustainability of its policies.
Looking to jolt the nation back to life, Japanese Prime Minister Shinzo Abe's cabinet has approved a ¥28T ($274B) stimulus package amid a growing consensus that monetary policy alone won't be able to revive the economy.
According to Dow Jones, the stimulus package ranks among Japan's biggest since the global financial crisis, and will: Lift GDP by 1.4%, include childcare benefits, provide $150 handouts to 22M low income people, loan ¥10.7T for infrastructure and provide ¥7.5T for direct fiscal spending.
The Bank of Japan held interest rates steady and offered up only a mild dose of stimulus. The central bank announced it would purchase ¥6 trillion ($57B) worth of exchange-traded stock funds annually, an increase from the prior amount of from ¥3.3T. The size of a key lending program was also doubled to $24B. The Nikkei Stock Index closed 0.6% higher after a volatile session. The yen and yields on Japanese government bonds shot higher.
"That the BOJ did not increase bond purchases is significant and will disappoint those looking for coordination of monetary and fiscal easing," notes RBC Capital Markets analyst Adam Cole.
The BOJ surprised markets in January with a move to negative interest rates, but has disappointed fans of monetary stimulus schemes ever since. The result has been a steady increase in the yen (though the currency has weakened somewhat since the Abe administration consolidated power in this summer's elections).
That's supposed to change on Friday, when 85% - according to a Reuters poll - expect the central bank to boost the size of its QE program, and further cut rates into negative territory.
The one-week implied volatility of dollar/yen ended last week at its highest level since 2008, according to Credit Suisse, meaning traders are gearing up for big swings in the pair. As for the Nikkei, traders are loading up on call options, and volatility on the WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ) is the highest in a year.