Since we can’t put charts in the Cut without borking format for a bunch of readers, here’s what a surprise commitment from the Bank of Japan to raising the monetary base by around Y80tn a year from Y60-70tn, a tripling of annual purchases of ETFs and REITS, and a certain (probably coordinated) GPIF rumour doing the rounds will do to Japanese equities and the yen.
More on the GPIF rumour and the positive and negatives of this latest Kuroda splurge near the bottom.
The Bank of Japan has bought bonds, bills, stocks and property since embarking on its radical monetary easing programme last April.
Now it’s buying time. Read more
Optimism from the mouth of Haruhiko Kuroda, in the FT:
At this stage, we are not thinking about any other policy tools since we are on track and we are likely to achieve the 2 per cent inflation target within the two-years time band.
But there’s a slight problem. From the pens of Credit Suisse (via our inbox):
Neither financial market participants nor the general public appear to have any real confidence in the BOJ’s ability to achieve +2% inflation. The expected inflation rate priced into the JGB linker market points to a steady state closer to +1% after the April 2014 consumption tax hike (Exhibit 1), while households appear to be anticipating even weaker inflation over the coming year.
We thought the following from TD Securities’ Richard Gilhooly on Tuesday was a rather insightful way of looking at the whole BoJ effect (our emphasis):
While it remains a contentious point and as yet unproven, Japan’s devaluation and soaring Nikkei vs slumping DAX or Bovespa has all the hallmarks of a competitive devaluation. While competing factions debate the Monetary expansion/QQE, versus beggar-thy-neighbour interpretation, one positive aspect of the Japanese Yen collapse and fear of exported deflation has been collapsing commodity prices with weak growth in export countries (China, Germany, S Korea) and a stronger USD helping a supply story (crude inventories at 22yr highs) and weak demand send commodities into a bear market.