Buying government bonds with longer maturities should be an option for the Bank of Japan if the European debt crisis worsens said a former deputy governor seen as a potential candidate to take the reins at the central bank.
We recently introduced the four main candidates in the 'how easy can we be' glamor parade that is the BoJ Governor race. With Abe potentially set to name his nomination as early as this week, the rhetoric is heating up. Citi grades the BoJ governor candidates on a scale of 1 to 5 from the perspective of JPY bullish/bearish. Mr.Kazumasa Iwata will be the most JPY bearish candidate as he is a proponent of the BoJ’s foreign bond purchase.
TOKYO — The Japan government’s nominee to be the next central bank governor outlined more forceful policy prescriptions on Monday to finally defeat deflation, saying he would not set any limits on the amount of cash the Bank of Japan pumps into the economy.
Underlining expectations he would be an aggressive governor, Haruhiko Kuroda told lawmakers the BOJ’s current policies were not powerful enough to boost inflation to 2 percent, a target he said the central bank should strive to achieve in two years.
The Bank of Japan (BOJ) has pledged to ramp up its asset-buying program as part of an aggressive stimulus package, in the latest effort by a major central bank to loosen monetary policy and spur economic growth.
Newly appointed Governor Haruhiko Kuroda committed the BOJ to buying about ¥84 trillion of Japanese government bonds this year – the equivalent of 17 percent of GDP – dwarfing its previous target of ¥46 trillion yen.
In what must be quite a surprise to Goldman (as we discussed here), the BoJ has decided not to give in to the market's demands: *BOJ REFRAINS FROM EXPANDING J-REIT, ETF PURCHASES (expected lifting of cap) *BOJ LEAVES FUNDING TERMS UNCHANGED AFTER JGB YIELD VOLATILITY (expected extension from 1Y to 2Y) The market's angry reaction... NKY -400 from US day-session highs, USDJPY gapped down 80 pips to 98.00, JGB Futs closed, JGBs unch. Full statement to follow:
As Citi's Todd Elmer notes, today's BoJ outcome looks far closer to 'shock and awe' than disappointment. It appears the BoJ's actions may speak as loud as their words for now - JPY is weakening and the Nikkei is rallying after Kuroda's last shot at a first impression appeared to beat expectations (covering for disappointing macro data - despite six months of jawboning and a 20% devaluation).
The economic news coming out of Japan is not heartening.
The world’s third-largest economy has entered a technical recession after contracting for two straight quarters, revised official data showed last month.
Analysts believe economic conditions probably worsened in the current quarter due to collapsing exports to China and the European Union, falling domestic auto sales and decelerating post-tsunami reconstruction spending.
But the negative news doesn’t end there.
Haruhiko Kuroda showed Wednesday he’s following in the footsteps of Ben Bernanke and Mario Draghi as he swung the Bank of Japan from incremental moves to unprecedented stimulus at the governor’s first policy meeting.
The BOJ will double the monetary base by the end of 2014 through buying government bonds, the central bank said in Tokyo, in Japan’s biggest round of quantitative easing. JPMorgan Chase & Co. said the Japanese and U.S. central banks are now “in the same camp” when it comes to monetary stimulus.