Something to keep an eye on (the respective reaction of the 6mth, 2-year, 5-year, 10-year and 30-year JGBs to the BoJ's QE onslaught): That's all the bond yields popping sharply (with exception of perhaps the 10-year) since Kuroda hit the "quantitative and qualitative" button. The moves aren't that big in nominal terms but for JGB's they are dramatic - as Nomura said of the 30yr, it's the sharpest three-day steepening in super-long zone since April 1995. More broadly this might be profit-taking by large Japanese investors and banks in particular - see charts here - and we wouldn't bet against a little front running of the BoJ move being unwound now it's been announced. Another possibility is it might be the start of something much more dangerous.The FT used the word kerfuffle. We had put this up in tumblr form earlier but got a very good note sent through by City FX wire that we thought deserved a bit more space: After Friday's rout we have seen a fair amount of volatility in the JPY rate market, and this afternoon that has spread into all parts of the curve, including as of yet insulated short term bonds and swaps. 5y swap 9bp wider today moving from 27bp on Thursday to 45bp today. Similar moves in JGBs where 3y bonds have gone up to 16bp which we were at over a year ago. Swap-spreads too are blowing up. Feeling is that as this keeps going, VAR models force large holders of short-dated paper (Mega-banks) to hedge or sell. Couple that with extremely diminished liquidity and huge bifurcation of markets between cash, swaps and futures, have to think that Japanese holders of bonds will keep reducing and paying swaps. All this under a background of the continued weaker JPY, the diversification into foreign bonds and assets, and a view amongst some (Kyle Bass and his following) that we are crossing the event horizon into the eventual blowup... smells more to me like the beginning of a 2003 event, which caused yields to spike over 100bp in 2m. Tomorrow brings a 30y JGB Auction with now what must be non-negligible risk of failure followed by the first post BoJ meeting of primary dealers in JGBs where the operational issues and considerations of the new BOJ easing program will be discussed. Will dealers be "encouraged" to buy bonds for a potential BoJ QE buying operation on Friday? Will BoJ call banks and tell them to calm down and not sell short dated bonds into the market? We don't really know. My guess is that this meeting will be technical in nature, and that there is no silver bullet here to fix the damage caused to JPY rate markets. Expecting a prolonged period of extreme volatility and uncertainty going forward and if this forced selling does not find a willing buyer, the BoJ may be forced to step in to do even more extraordinary measures. It's anyone's guess if Kuroda's remarks on Wednesday were aimed at the spikes but as Deutsche's Alan Ruskin said: Kuroda denying the prospect of an avalanche of capital outflows does not constitute jawboning, it is the minimum one should expect from a BOJ official. Particularly a week after the original announcement. Related links: Japan's unfinished policy revolution - Martin Wolf FT The BoJ massive - FT Alphaville JGB futures fall sharply, TSE briefly suspends trading - Reuters