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May 30, 2013
Flash: BoJ cannot stop now – Westpac
FXstreet.com (Barcelona) - Volatility in the previously sleepy Japanese government bond market has exploded since Bank of Japan governor Kuroda took the reins and this is by no means irrational.
On the positive side for JGBs, the BoJ’s aggressive version of quantitative easing is projected to see it buy a net JGB50 trillion (almost $500bn) in JGBs annualized until at least end-2014. If the central bank is a regular, massive buyer of JGBs then why worry?
According to Global FX Strategist Sean Callow at Westpac, “The obvious problem is that as it buys JGBs through money created by simply raising the balance of accounts held by the banks that own the JGBs, the BoJ is trying to generate inflation. “If the economy continues to suffer deflation of near -1%, then the 0.8% yield on a 10-year JGB at the start of this year was not a bad ‘real’ return.
On the positive side for JGBs, the BoJ’s aggressive version of quantitative easing is projected to see it buy a net JGB50 trillion (almost $500bn) in JGBs annualized until at least end-2014. If the central bank is a regular, massive buyer of JGBs then why worry?
According to Global FX Strategist Sean Callow at Westpac, “The obvious problem is that as it buys JGBs through money created by simply raising the balance of accounts held by the banks that own the JGBs, the BoJ is trying to generate inflation. “If the economy continues to suffer deflation of near -1%, then the 0.8% yield on a 10-year JGB at the start of this year was not a bad ‘real’ return.